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Young and foolhardy? Homeowners under 40 more likely to be underwater

Posted by Scott Van Voorhis August 23, 2012 06:54 AM

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Here's a pretty stunning number: Just under half of all homeowners under 40 are struggling with underwater mortgages.

The stat comes from Zillow's second quarter report on negative equity. And the numbers are even higher when you look at homeowners in their early thirties, a full half of whom are underwater.

That number, however, steadily drops with age, with just under a third of homeowners in their late forties underwater and just under a quarter of those in their late fifties buried under more mortgage debt than their homes are worth, according to Zillow.

The most obvious explanation is that homeowners now in their thirties were more likely to have bought starter homes at the peak of the bubble and now find themselves stuck.

Homeowners now in their forties or fifties, by contrast, bought their houses in the 1990s or early 2000s, dodging the crazy escalation in prices.

Still, it does make you wonder if the overconfidence of youth can play a part as well. Instead of balking at inflated prices back during the bubble, too many buyers went along, thinking they could make it work and confident that real estate values would just keep on inflating.

That's obviously pretty speculative. But with so many young homeowners stuck underwater, is it any wonder there is a dearth of homes on the market, both here in Greater Boston and across the country?

Zillow Chief Economist Stan Humphries contends the high percentage of underwater borrowers under 40 has bottled up a huge number of starter homes that would otherwise be on the market right now.

This is what Humphries had to say in the press release sent out this morning on the report.

"We hear about tight inventory in many markets, and it's clear where this is coming from," Humphries stated. "Negative equity is trapping young people in their homes, preventing them from selling. These homes are likely the very starter homes potential first-time homebuyers are seeking."

This blog is not written or edited by or the Boston Globe.
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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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