Negative equity continued to fall in the fourth quarter of 2012, dropping to 27.5% of all homeowners with a mortgage, compared with 31.1% one year ago, according to new data from Seattle-based Zillow.
Zillow reports that although nearly 2 million American homeowners were freed from negative equity over the course of the year, approximately 13.8 million homeowners with a mortgage were in negative equity at the end of the fourth quarter. That was down from 15.7 million in the fourth quarter of 2011. American homeowners with a mortgage were collectively underwater by more than $1 trillion at the end of 2012.
In 2012, national home values rose 5.9% year-over-year, according to Zillow, to a median value of $157,400. This jump in home values, coupled with sustained high foreclosure rates, was the main driver for receding negative equity, Zillow adds.
Zillow predicts the negative equity rate among all homeowners with a mortgage will fall to at least 25.5% by the fourth quarter of this year, freeing more than 999,000 additional homeowners nationwide.
‘As home values continue to rise and more homeowners are pulled out of negative equity in 2013, the positive effects on the housing market will be numerous,’ says Zillow Chief Economist Stan Humphries. ‘But negative equity is still very high, and millions of homeowners have a very long way to go to get back above water, even with current robust levels of home value appreciation in most areas. As a result, negative equity will remain a major factor in the market for the foreseeable future.’