Zillow: Negative Equity Still Affects 10% of Homeowners
Five years into the housing recovery, negative equity still affects more than one in 10 homeowners, said Zillow Inc., Seattle.
The company’s Second Quarter Negative Equity Report said nationally, 12.1 percent of mortgaged homeowners are underwater, down from 12.7 percent in the first quarter and 14.4 percent a year ago. Nearly 14 percent of homeowners in urban regions and 11.2 percent of homeowners in suburban regions are underwater.
For the first time, Zillow said all of the largest markets in the country now have negative equity rates below 20 percent.
Cleveland and Detroit have the greatest difference between urban and suburban negative equity rates, the report said. Negative equity is lowest in western metros with strong job and housing markets. But the report noted homeowners who owe more than their homes are worth are nearly equally dispersed among urban and suburban communities in most metros across the country.
“At its worst, negative equity touched all kinds of homeowners in all kinds of markets,” said Zillow Chief Economist Svenja Gudell. “The type of community a given home was in–urban or suburban–mattered little. Fast-forward a few years, and the relative vibrancy of a given community and how it has performed over the past few years, and not necessarily its location in the city or suburbs, matters a great deal.”
At the height of the effect of the Great Recession, nearly one-third of homeowners in the United States were underwater on their mortgages. As the market recovered, many homeowners have gained back the lost value on their homes, freeing them to sell or refinance.
The report said in most areas of the country, negative equity is nearly equally spread across urban and suburban areas. In 13 of the nation’s largest metros, the share of urban and suburban homeowners who are underwater is within two percentage points. Cleveland and Detroit have the biggest difference between negative equity rates in urban and suburban neighborhoods–13.6 and 10.8 percentage points, respectively. In these metros, home values in the main urban centers are trailing behind the overall region’s recovery, and are still well off from their peak levels.
By contrast, negative equity is equally common among urban and suburban areas in the Seattle area, where a more balanced recovery and strong economic growth have led to home values near or exceeding their bubble peak levels in urban and suburban areas alike. Western metros with strong job and housing markets have the lowest rates of negative equity. Less than 5 percent of mortgaged homeowners in San Jose, San Francisco, Portland, Denver and Dallas are underwater.
