12.2M Homeowners Underwater
The national negative equity rate continued to
drop in the second quarter as home values marched upward.
Zillow's most recent Negative
Equity Report shows approximately 12.2 million homeowners owed more on their
mortgage than their home is worth last quarter, down from 13 million in the
first quarter and 15.3 million the same time last year.
Those 12.2 million underwater
homeowners represent approximately 23.8
% of all homeowners with a mortgage, Zillow said. The negative equity rate
among all homeowners--including those without a mortgage--was 16.7 % at the end of the quarter. (Roughly
one-third of homes are owned without a mortgage.)
For the second quarter of 2014,
Zillow predicts the negative equity rate will fall to 20.9 %, lifting an
additional 1.9 million homeowners into positive equity.
home values during the past year have helped chip away at negative equity
nationwide, helping many homeowners who were only modestly underwater to come
up for air,"" said Zillow chief economist Dr. Stan Humphries.
""For those homeowners who are deeply underwater, though, there is
still a long row to hoe.""
Out of those homeowners in
negative equity, 57 % were underwater by 20 %
or more, and roughly 13.4 percent owed more than twice their home's worth.
If home values appreciated at
an annual rate of 4.8 % per year (Zillow's forecast for the next year), it
would take a homeowner underwater by 20 % nearly four years to reach positive equity.
The frustratingly slow pace of
negative equity declines in the face of such robust home value appreciation is
a direct result of the fact that many people in the hardest-hit markets are underwater
by an enormous amount & because of this, negative equity will be a factor
in these markets for years to come, constraining the supply of homes for sale
and keeping people out of the market who might otherwise get involved.
Meanwhile, the effective negative
equity rate--which includes homeowners with a mortgage who have 20 % or less
equity in their homes--was 41.9 % in Q2,
a decline from 43.6 % in the prior quarter. Because of the expenses associated
with listing a home and buying a new one, those owners with equity of less than
20 % are essentially locked into their homes, regardless of whether or not
they're actually underwater.