More than 3 million underwater homeowners have returned to positive equity in the past year, due mainly to rising property values. However, it's going to take years before a majority of homeowners who are underwater on their mortgages return to positive equity.
According to Zillow's Negative Equity Report, the national negative equity rate continued to fall in the second quarter, dropping to 23.8% of all homeowners with a mortgage.
About 12.2 million homeowners with a mortgage were underwater at the end of the second quarter, down from 13 million in the first quarter and 15.3 million in the second quarter of 2012.
The negative equity rate among all homeowners, both with and without a mortgage, was 16.7% at the end of the second quarter, according to the report.
‘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,’ says Dr. Stan Humphries, chief economist of Zillow, in a release. ‘For those homeowners who are deeply underwater, though, there is still a long row to hoe.’
‘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,’ Humphries adds. ‘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.’
Nationwide, about 57% of homeowners in negative equity are underwater by 20% or more, the report finds.
What's more, roughly one in seven (13.4%) owes more than twice of what their home is worth.
According to the most recent Zillow Home Value Forecast, home values are expected to rise 4.8% in the next year. But even with the rate of appreciation, it would take a homeowner underwater by 20% roughly four years to reach positive equity.
The ‘effective’ negative equity rate, which includes those homeowners with a mortgage with 20% or less equity in their homes, fell to 41.9%, from 43.6% in the first quarter.
Metro areas covered by Zillow with the highest percentage of underwater homeowners with mortgages included Las Vegas (48.4%), Atlanta (44%) and Orlando (39.8%).
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