GR ranks 10th for underwater mortgages

GRAND RAPIDS, Mich. (WOOD) - Grand Rapids is ranked 10th in the country for underwater mortgages, according to a new study from U.S. News & World Report -- but local experts say the list is not a good representation of reality.

The report examined houses in which more money is owed than the home is worth. But the study includes only one city per state, so it's not as comprehensive as it may seem, analysts say. For example, Detroit has a higher percentage of underwater mortgages than Grand Rapids, but somehow, the city didn't make the list.

The report is based on research from real estate Web site Zillow. In the Grand Rapids synopsis, the article links the deteriorating economy to the higher number of underwater mortgages. That number -- about 29 percent of all single-family home mortgages -- is higher than the national average.

"We're back to '95, '96 housing prices, so if you bought your house after that point in time, on average, they're worth less than that now," said Dr. Paul Isely, an associate economics professor at Grand Valley State University.

One of the factors the cities on the list have in common is an increase in home values followed by a crash, he added.

"For Grand Rapids, you can see from 2000 to 2005, we had an increase in the value of houses, and then starting at that time, we had this big drop," Isely said. "The result is a group of homeowners that are more susceptible to any other financial problems. The burden of a lost job, sending a child to college or unforeseen medical bills could become unmanageable when a big investment like a home is not on solid ground."

Looking at the report through a vacuum can look daunting by itself, he added. But if you consider some other factors in West Michigan, the future doesn't seem so bad.

Numbers show improvement by Kent County residents in regards to making car, student loan and credit card payments, Isely said.

That's a good sign homeowners will be able to get through this dip in the housing market, he said. Also, the population in Grand Rapids has stayed the same or increased over the past few years, which is another factor Isely said points to a brighter future.

Whether homeowners in underwater mortgages will survive or head for foreclosure all depends.

"If (these people) can pay their mortgage now, it's just a matter of waiting it out," Isely said. "As you pay your mortgage, you build equity and at some time, the value of your house is probably going to start going up this year."

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Worst Underwater Housing Markets, including Grand Rapids