First-time homebuyers search for affordable homes; however those homes are a rare find on the market because of the negative equity on most of those homes. According to the first quarter of Zillow® Negative Equity Report, almost 9.7 million homeowners are underwater.
Homeowners who owe more on their mortgage than the house is worth are in a sticky situation. This is usually because they have fallen behind on their payments and are not able to afford that house anymore. Homeowners in a negative equity situation are not able to bring money to closing or pay for the deficiency, so they are not able to list their home for sell on the market.
In order to successfully sell their home, the homeowner would have to do a short sale so that the lender would accept a short payoff of what is owed. With the right short sale specialist, this would help the homeowners move on and avoid any further financial problems.
The misleading information and absence of the resources about short sales are contributing to the inventory shortage. This leads to the homes that are on the market to be priced higher, making homes even less affordable for first-time homebuyers.