Here’s a way rising home prices may increase inventory

The rise in Whatcom County home prices has meant more people are above water when it comes to loans, and that could be good news for buyers.

6.1 Percentage of Whatcom County homeowners with mortgages underwater at the end of September, according to Zillow.

A new report from Zillow estimates 6.1 percent of Whatcom County homeowners with mortgages were underwater at the end of September, meaning they owed more than what the house was worth. That’s down from 21.6 percent at the end of September 2012. A 2 percent to 3 percent underwater rate is considered normal and healthy in a real estate market, said Jordyn Lee of Zillow.

The total amount of negative equity in Whatcom County is $270 million, according to the report.

That’s good news for homeowners in terms of financial stability, but it also could mean more choices for buyers if it continues to drop, said Svenja Gudell, Zillow’s chief economist. When a homeowner owes more on a loan than what the house is worth, a short sale is usually the only option for those interested in selling. That tends to keep homes off the market, contributing to low inventory.

As homeowners previously underwater on their mortgage start building equity, they have more options such as refinancing or selling, increasing real estate activity.

“I expect homes will gain value steadily, for solid economic reasons, and that negative equity rates will continue to fall,” Gudell said.

Across the U.S., Zillow estimates 10.9 percent of homeowners are underwater on their loans, with the negative equity totaling $479 billion. In Seattle, 6.6 percent are considered underwater, with a total negative equity of $6.8 billion. Even with 10.9 percent of homeowners being underwater, the national housing market has nearly regained the value lost during the recession, according to the report.

According to the study, 26.1 percent of homeowners with a mortgage in the U.S. have less than 20 percent equity in their homes. Having less than 20 percent equity in a home makes it tougher to cover the costs of selling a home, such as agent fees, closing costs and having a down payment for a new home.

With low inventory, home prices have risen quickly, particularly in Bellingham. During the third quarter, the median price for homes sold in Bellingham was $369,900, a 13.6 percent increase compared to a year earlier. The Northwest Multiple Listing Service estimated that Whatcom County had about 2.3 months of available inventory at the end of November; typically a balanced market between buyers and sellers involves a six-month supply.

Distressed property problems also continue to ease locally, according to the latest report from CoreLogic. The percentage of Whatcom County homeowners who are at least 90 days delinquent on their mortgages was 1.34 percent in September, among the lowest rates since 2008. The percentage of Whatcom homeowners in some stage of foreclosure was 0.43 percent.

Dave Gallagher: 360-715-2269, @BhamHeraldBiz