Negative Equity Rate Falls in Second Quarter

According to Zillow’s recent Negative Equity Report, the second quarter of 2013 witnessed the decline of houses considered to be under water. Only 23.8 percent of all homes with a mortgage had negative equity, as the housing sector proceeded to encourage higher property values. Of particular concern, however, are the remaining families that continue to face the burden of negative equity. Analysts fear that families considerably under water may not surface for quite some time. Even though prices continue to increase, it may take years for them to regain equity.

According to the Negative Equity Report, nearly 12.2 million homeowners with a mortgage were under water by the end of the second quarter of this year. More specifically, they owed more on their mortgage than their house was worth at the time. While the number of under water homes remains unsettling, it has declined .8 percent since the first quarter and nearly 3.1 percent from this time last year. Trends remain positive as we continue on the path towards recovery.

These numbers neglect to include homes that are owned without a mortgage. Conversely, the addition of homes without a mortgage to this equation would increase the under water rate to approximately 16.7 percent at the end of the second quarter.

On a national level, 57 percent of the houses with negative equity are underwater by 20 percent or more. Perhaps even more disturbing, is the fact that one in seven of them owe more than twice what their home is worth. It is these homes that analysts have grown more concerned with, as they will not regain equity any time soon, potentially hurting the economy. The latest Zillow Home Value Forecast predicts it may take as long as four years for these homes to reach positive equity. That is assuming property values continue to rise at 4.8 percent.

“Widespread rising 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. For those homeowners who are deeply underwater, though, there is still a long row to hoe,” said Zillow Chief Economist Dr. Stan Humphries. “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.”