This new housing report shows that 20% of homeowners in Silicon Valley owe an outstanding mortgage balance that is greater than their property value.  According to real estate news company zillow.com, during the 4^th quarter of 2008, nearly 20% of homeowners in the San Jose metro area were experiencing “negative home equity.” Home values vary greatly in some Santa Clara County neighborhoods.  This is the most significant decline in over a decade. Many home financing evaluators are predicting that mortgage modifications will reduce foreclosures in 2009.

When people are concerned about their income and savings disappearing, fewer will purchase homes despite low mortgage interest rates and falling prices.  It is a difficult time for homeowners with these drops in values, but most real estate experts believe that home values will rebound eventually. Until then, FHA continues to extend a great opportunity for 1st-time homebuyers previously priced out of the market. Low interest rates along with lower home prices, especially foreclosure properties, are encouraging more new home buyers.