(TheNicheReport) -- Underwater homes have been interfering with the recovery of the American housing market over the last few years. The number of homeowners whose properties are worth less than the principal amount due on their mortgages has been steadily increasing since around 2008, but a new report by online real estate analytics firm Zillow points to a slight relief.
According to Zillow, the number of underwater properties at the end of March 2012 was 15.7 million. At the end of the second quarter, that number dropped to 15.3 million. Unsurprisingly, the two housing markets that experienced the sharpest drops in the rate of underwater homes were Miami and Phoenix. These two major metropolitan areas are among the dozen or so hot rental markets in the United States at the moment, and they also happen to be two regions that were more drastically affected by the bursting of the housing bubble.
A full recovery of the housing economy would entail a lesser incidence of underwater properties, and in Phoenix that happens to be the situation for a little more than half of all mortgage borrowers. In Miami, the rate of underwater homes is approximately 43 percent.
Further Relief Expected in the Next Few Months
The practice of short sales has proven useful in the fight against negative equity, and the Federal Housing Finance Agency (FHFA) is poised to help in this regard. The two major government-sponsored mortgage investors, Fannie Mae and Freddie Mac, are set to ease their restrictions on short sales starting on November 1st. This announcement comes in the wake of a backlash against the acting director of the FHFA, Edward DeMarco, and his opposition to writing off principal balances of mortgages guaranteed by Fannie and Freddie.
One of the factors that will enable easier and speedier short sales consists of forcing second-lien investors to accept a maximum of $6,000 to remove their encumbrances. Borrowers who are not yet delinquent on their mortgage payments might also be able to apply for a short sale
if they foresee trouble in the horizon, and these includes borrowers who are already late on their payments but have not slid into default.