Eleven million homeowners still underwater

Nearly one quarter (23 percent, or 11 million) of all borrowers owe more than their home is worth, according to the latest U.S. Housing and Mortgage Trends Report from CoreLogic, a provider of consumer, financial and property analytics.

Current shadow inventory has declined slightly over the past year, but it will remain elevated for an extend period of time given that there are still over two million non-delinquent borrowers not part of the current shadow inventory but in deep negative equity.

The new study also provided statistics on the impact of the federal tax credit. Since the expiration of the tax credit, overall sales activity has been anemic. In early 2009, home sales were experiencing double-digit declines on a year-over-year basis. Sales in the upper-end price range ($650,000 and above) were declining over 50 percent from 2008 while sales in the lower price bands (below $150,000) were only down slightly from 2008.

As the first federal homebuyer tax credit was set to expire in November 2009, sales across the board increased in every price segment. However, the increases were especially pronounced in the $50,000 to $250,000 bracket, where sales were over 45 percent higher than a year earlier and to a lesser extent in the upper price ranges.

The tax credit was eventually extended to April 2010 and the same phenomenon occurred as April approached, but this time the upper price range ($650,000 and above) by far experienced the largest increases in sales, the study found.

The most likely reason for the upper price range’s stronger and more sustained response to the second tax credit period is that the stock market was materially higher in April of 2010, compared to the fall months of 2009.

The positive impact of the tax credit on sales was felt in the lower price ranges, but after it expired, sales volume of lower-priced homes declined by much more than the upper price ranges.