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More than One in 10 Homeowners Underwater as Housing Market Nears Full Recovery

Rising home values are freeing homeowners from negative equity, allowing them to re-enter the market, but 11 percent of homeowners remain upside-down

- Nationally, the negative equity rate fell to 10.9 percent in the third quarter, down from 13.4 percent a year ago.

- Western metros have the lowest rates of negative equity.

- 26.1 percent of homeowners with a mortgage have less than 20 percent equity in their homes, or are in effective negative equity.

Dec 15, 2016

SEATTLE, Dec. 15, 2016 /PRNewswire/ -- Even as home values approach the highest levels reached during the housing bubble, 11 percent of homeowners with a mortgage are underwater, according to the third quarter Zillow® Negative Equity Reporti.  

The share of homeowners who owe more on their mortgages than their homes are worth has dropped by nearly two-thirds since the housing bubble burst four years ago. Nationally 5.3 million homeowners were in negative equity in the third quarter, meaning they owe more than their homes are worth. At the peak in Q1 2012, 15.7 million homeowners were underwater on their mortgages.

The numbers are another sign that the housing market has nearly regained the value lost during the recession, and is only 2.7 percent below the peak reached at the height of the bubble. Not all regions have experienced the same recovery, though, and some markets are still well below those bubble highs.

Underwater homeowners can't refinance to take advantage of still-low mortgage rates and they can't sell their homes except in short sales, which keeps these homes off the market, contributing to low inventory.

Seven of the 10 large metros with the lowest rates of negative equity are along the West Coast, and also have strong economic markets. Fewer than five percent of homeowners are underwater in San Jose, San Francisco, Portland, Ore., Denver, and Dallas. In these metros, home values have also surpassed the highest point reached during the bubble, and are now higher than ever.

Chicago and Las Vegas have the highest levels of negative equity, with 17 percent and 16.8 percent of homeowners underwater respectively. Home values in these markets remain well below their peak levels.

"As the housing market recovers and home values rise, the number of homeowners underwater on their mortgages continues to drop," said Zillow Chief Economist Dr. Svenja Gudell. "In addition to the individual homeowners who are underwater, negative equity affects the housing market as a whole, so this is good news not only for these owners, who are now able to either sell their home or at least regain some financial stability, but also for buyers who may find more options now. I expect homes will gain value steadily, for solid economic reasons, and that negative equity rates will continue to fall."

Homeowners who have less than 20 percent equity in their homes may find it difficult to cover the associated costs of selling, such as agent fees, closing costs, and a new down payment if they are buying a new home. More than a quarter of homeowners with a mortgage are in this situation, known as effective negative equity.

Metropolitan Area

Percent of
Underwater
Homeowners

Total Amount
of Negative
Equity

Number of
Homes in
Negative Equity

Effective
Negative
Equity Rate

United States

10.9%

 $479 billion

5,269,166

26.1%

New York/Northern New Jersey

10.0%

 $40 billion

250,842

21.5%

Los Angeles-Long Beach-Anaheim, CA

5.7%

 $18.8 billion

90,452

14.0%

Chicago, IL

17.0%

 $29.8 billion

277,867

33.5%

Dallas-Fort Worth, TX

4.4%

 $5 billion

44,998

12.7%

Philadelphia, PA

11.8%

 $10.7 billion

124,492

29.4%

Houston, TX

6.9%

 $6.1 billion

59,000

19.4%

Washington, DC

12.4%

 $19.9 billion

136,068

30.5%

Miami-Fort Lauderdale, FL

10.6%

 $9.8 billion

88,840

21.1%

Atlanta, GA

13.0%

 $10.8 billion

127,592

30.3%

Boston, MA

6.2%

 $7.9 billion

49,005

14.3%

San Francisco, CA

3.7%

 $5.9 billion

24,224

8.9%

Detroit, MI

12.2%

 $5.8 billion

93,270

24.0%

Riverside, CA

10.5%

 $8.3 billion

65,609

26.3%

Phoenix, AZ

11.2%

 $9.1 billion

79,519

29.6%

Seattle, WA

6.6%

 $6.8 billion

41,667

17.2%

Minneapolis-St Paul, MN

7.3%

 $5 billion

48,956

22.4%

San Diego, CA

6.3%

 $4.9 billion

27,452

18.1%

St. Louis, MO

12.6%

 $4.2 billion

66,607

30.8%

Tampa, FL

10.5%

 $3.6 billion

48,764

24.9%

Baltimore, MD

14.4%

 $7.9 billion

73,895

34.4%

Denver, CO

4.4%

 $3.3 billion

22,326

11.9%

Pittsburgh, PA

8.1%

 $2.2 billion

33,395

19.8%

Portland, OR

3.8%

 $2.1 billion

15,152

11.7%

Charlotte, NC

8.1%

 $3.6 billion

34,268

24.2%

Sacramento, CA

7.6%

 $3.6 billion

27,123

20.9%

San Antonio, TX

10.2%

 $2.9 billion

30,933

28.3%

Orlando, FL

11.4%

 $3.3 billion

39,743

27.0%

Cincinnati, OH

10.8%

 $3.1 billion

43,385

29.6%

Cleveland, OH

14.6%

 $3.3 billion

55,547

31.1%

Kansas City, MO

12.4%

 $3 billion

44,646

33.1%

Las Vegas, NV

16.8%

 $5 billion

49,809

36.8%

Columbus, OH

9.0%

 $2.7 billion

31,314

24.1%

Indianapolis, IN

12.8%

 $3 billion

46,772

33.9%

San Jose, CA

2.6%

 $1.9 billion

6,905

6.4%

Austin, TX

6.6%

 $2.2 billion

18,383

18.6%

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. Svenja Gudell. Dr. Gudell and her 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 ZG), 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.

 

SOURCE Zillow

For further information: Lauren Braun, Zillow, press@zillow.com


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