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More homeowners are above water in their mortgages

The number of U.S. homes worth less than what is owed on their mortgages dropped in the second quarter, another positive sign that the national housing market is shaking off the effects of the prolonged downturn.

The number of U.S. homes worth less than what is owed on their mortgages dropped in the second quarter, another positive sign that the national housing market is shaking off the effects of the prolonged downturn.

RealtyTrac, an Irvine, Calif.-based real estate information company that monitors foreclosures, reported Thursday that the percentage of so-called seriously underwater properties fell to 13.3 percent of all U.S. homes with mortgages in the quarter, or 7.44 million.

"Seriously underwater" is defined by RealtyTrac as those houses for which the combined loan amount secured by a property is at least 25 percent higher than the property's estimated market value.

Although the second-quarter number was slightly higher than the first quarter's 7.34 million homes, or 13.2 percent, the three-month figures were well below the level of April through June 2014 (9.07 million homes or 17.2 percent).

Nationwide, the number peaked in second quarter 2012 at 12.82 million, or 28.6 percent of all homes with mortgages.

Though slowing home-price appreciation this year has resulted in the numbers remaining at 13 percent, RealtyTrac vice president Daren Blomquist said the share of homeowners with seriously underwater properties that are also in foreclosure is at the lowest level since first quarter 2012, when the company began tracking it.

In Pennsylvania, 12.3 percent of all mortgages, or 264,294, fall into the seriously underwater category. In New Jersey, the number is 14.6 percent, or 265,886.

In the Philadelphia metro area, which includes Wilmington, 14.5 percent, or 204,573 homes, are underwater.

Owing more on a mortgage than a house is worth is not a problem unless the homeowner cannot make the payments or wants to sell the property, industry observers say.

In many situations, a homeowner will resort to a short sale, in which the lender agrees to accept less than the loan balance.

Mike Lentz, of Keller Williams Real Estate in Washington Township, said he had "purposely avoided" handling short sales for two or three years, but added that they were becoming less frequent.

For the first half of 2014, Lentz said, 111 of 1,296 closed sales in Gloucester County were short sales. For the first half of 2015, that number is down to 93 of 1,479, he said.

"The gap has narrowed," Lentz said. "Prices have now risen to the point where the gap/loss is more manageable and they are able to sell the house."

Mickey Pascarella, of Keller Williams in Center City, said, "We've pretty much been able to strike the term short sale from our vocabulary."

"In the hot neighborhoods - Passyunk Square, Art Museum, Graduate Hospital - values are comfortably higher than they were during the peak," Pascarella said. "Homeowners are now able to sell. And they are."

There has been a decline in distressed sales, but part of it is that the backlog of them has been absorbed, said Diane Williams, of Weichert Realtors in Blue Bell.

"Moderate" appreciation in sale prices now has allowed people to sell their homes because it has enabled them to cover the amount owed on their mortgages, she said.

While also noting a decline in short sales, Ellen Cassidy, of Coldwell Banker Hearthside in Bucks County, quickly added that they were "still a significant part of the marketplace in certain areas, especially in lower price points," and gave Levittown as an example.

Robert Acuff, of Re/Max Services in Blue Bell and a board member of Trend, the multiple-listing service, said short sales in the region have decreased 15 percent since 2014 and 40 percent since 2013, as prices have stabilized and sales volume has increased.

Distressed sales rose 5.7 percent at the end of June, but represented a smaller percentage of overall sales, Acuff said. June was the first month since 2009 that distressed sales made up less than 10 percent of overall transactions, he noted.

Banks are getting rid of their repossessed inventory at a steady rate.

There were 1,761 sales of bank-owned homes in the second quarter - "the most of any quarter," Acuff said, with 30 percent of them in South Jersey, which typically has 19 percent.

"The consensus is prices will drift up [for all homes] in the 2 percent to 3 percent range throughout the balance of the year - a healthy rate," he said.

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