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More than Half of Underwater Homeowners Are Nowhere Near Re-Surfacing

Slowing home value growth in the U.S. means underwater homeowners are likely to be trapped in their mortgages for years to come.

- The U.S. rate of negative equity among mortgaged homeowners was 15.4 percent in first quarter of 2015, down from 16.9 percent in the fourth quarter.

- Of those homeowners who owed more than their home is worth, over half - about 4 million owners - owed over 20 percent more than the value of their home.

- Low-end homes were more than three times as likely to be in negative equity than high-end homes.

Jun 12, 2015

SEATTLE, June 12, 2015 /PRNewswire/ -- The U.S. negative equity rate is dropping, but more than 4 million U.S. homeowners owed the bank at least 20 percent more than their homes were worth, according to the first quarter Zillow® Negative Equity Reporti.

That means those homes would have to appreciate at least 20 percent for their owners to have any chance of breaking even on a sale. Home values are forecast to continue rising, but at a slower pace than recent years.

The national negative equity rate dropped to 15.4 percent in the first quarter. A year ago, the rate was 18.8 percent. The rate of negative equity improved in all of the 35 largest housing markets in the first quarter of 2015, a sign that, metro-by-metro and home-by-home, the country is continuing to recover from the lax lending rules and subsequent housing market bust of the last decade.

At the peak of the real estate crisis, more than 15 million homeowners owed more on their mortgages than their homes were worth, putting them in negative equity. Foreclosures, short sales and rapidly rising home values freed nearly half of those homeowners, leaving 7.9 million homeowners upside down at the end of Q1 2015. Homeowners who remain underwater will likely be the toughest to free from negative equity.

Spring and summer are the busiest buying and selling seasons, and this year, there is high demand for homes in the bottom third of the market. However, a disproportionate number of those homeowners are simply stuck in their homes and can't afford to sell to buyers looking for homes in their price range.

The rate of underwater homeowners was much higher among the homes with the least valueii. More than 25 percent of those who own the least valuable third of homes were upside down, compared to about 8 percent of the most valuable third of homes.

The imbalance was even more pronounced in some markets. In Atlanta, for example, 46 percent of low-end homeowners were underwater, compared with 10 percent of high-end homeowners. In Baltimore, 32 percent of low-end homeowners were in negative equity, compared to 9 percent of those who own the highest-value homes.

"It's great news that the level of negative equity is falling, but what really worries me is the depth of negative equity. Millions of Americans are so far underwater, it's likely they may not re-gain equity for up to a decade or more at these rates," said Zillow Chief Economist Dr. Stan Humphries. "And because negative equity is concentrated so heavily at the lower end, it throws a real wrench in the traditional housing market conveyor belt. Potential first-time buyers have difficulty finding affordable homes for sale because those homes are stuck in negative equity. And owners of those homes can't move up the chain because they're stuck underwater in the entry-level home they bought years ago. The logjam at the bottom is having ripple effects throughout the market, and as home value growth slows, it will be years before it gets cleared up. In the meantime, we'll be left with volatile prices, limited inventory, tepid demand, elevated foreclosures and a whole lot of frustration."

Among the 35 largest housing markets, Las Vegas, Chicago and Atlanta had the highest rates of homeowners in negative equity. A smaller share of homeowners were upside down in Miami and Detroit, but homeowners there were more deeply underwater. In both places, over 60 percent of homeowners in negative equity were more than 20 percent underwater.

Metro Area

Q1 2015

Negative Equity Rate

Number of Homes in Negative Equity

% of Underwater Owners Who Owe 100 to 120% of  Home Value

% of Underwater Owners Who Owe More Than 120% of Home Value

United States

15.4%

7,911,469

48.1%

51.9%

New York, NY

12.4%

307,573

46.9%

53.1%

Los Angeles, CA

8.1%

137,621

46.7%

53.3%

Chicago, IL

23.7%

413,690

40.4%

59.6%

Dallas-Fort Worth, TX

6.9%

74,232

48.6%

51.4%

Philadelphia, PA

17.6%

197,403

51.6%

48.4%

Houston, TX

6.5%

59,785

44.7%

55.3%

Washington, DC

17.2%

193,418

45.0%

55.0%

Miami-Fort Lauderdale, FL

17.4%

164,774

36.0%

64.0%

Atlanta, GA

23.2%

244,509

42.9%

57.1%

Boston, MA

8.5%

69,335

50.2%

49.8%

San Francisco, CA

6.1%

42,099

46.3%

53.7%

Detroit, MI

19.4%

160,914

36.5%

63.5%

Riverside, CA

16.4%

110,128

43.2%

56.8%

Phoenix, AZ

19.0%

146,948

43.3%

56.7%

Seattle, WA

14.6%

96,516

50.3%

49.7%

Minneapolis-St Paul, MN

14.1%

97,426

55.3%

44.7%

San Diego, CA

8.6%

39,812

50.9%

49.1%

St. Louis, MO

20.4%

114,525

50.0%

50.0%

Tampa, FL

19.2%

98,907

41.9%

58.1%

Baltimore, MD

18.7%

100,139

52.4%

47.6%

Denver, CO

6.7%

35,336

41.2%

58.8%

Pittsburgh, PA

10.9%

46,493

48.2%

51.8%

Portland, OR

9.3%

38,764

57.4%

42.6%

Sacramento, CA

14.1%

53,155

46.3%

53.7%

San Antonio, TX

11.4%

37,549

48.4%

51.6%

Orlando, FL

19.2%

73,190

41.9%

58.1%

Cincinnati, OH

16.9%

71,988

50.8%

49.2%

Cleveland, OH

19.9%

80,248

45.4%

54.6%

Kansas City, MO

19.8%

76,415

50.8%

49.2%

Las Vegas, NV

25.0%

83,476

35.5%

64.5%

San Jose, CA

3.8%

10,711

50.2%

49.8%

Columbus, OH

15.7%

55,581

48.0%

52.0%

Charlotte, NC

13.8%

49,240

52.2%

47.8%

Indianapolis, IN

16.7%

60,086

49.7%

50.3%

Austin, TX

6.9%

20,251

52.1%

47.9%

About Zillow

Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Stan Humphries. In 2015, Dr. Humphries co-wrote and published the New York Times' bestselling "Zillow Talk: The New Rules of Real Estate." Dr. Humphries and his team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ: Z), and headquartered in Seattle.

Zillow is a registered trademark of Zillow, Inc.

                                     
i The data in the Zillow Negative Equity Report incorporates mortgage data from TransUnion, a global leader in credit and information management, to calculate various statistics. The report includes, but is not limited to, negative equity, loan-to-value ratios, and delinquency rates. To calculate negative equity, the estimated value of a home is matched to all outstanding mortgage debt and lines of credit associated with the home, including home equity lines of credit and home equity loans. All personally identifying information ("PII") is removed from the data by TransUnion before delivery to Zillow. Overall, this report covers more than 870 metros, 2,400 counties, and 23,000 ZIP codes across the nation.
ii Homes in each metropolitan region are assigned to the bottom, middle or top tier of homes based on their estimated home value. Each tier contains one-third of the homes in the metro region, and the thresholds defining each tier are computed separately for each metro.

 

SOURCE Zillow

For further information: Emily Heffter, Zillow, 206-757-2701 or press@zillow.com


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