Zillow: One-Third Of U.S. Mortgages Are Underwater

Nearly one-third of U.S. homeowners with mortgages – 31.4%, or 15.7 million people – were underwater on their mortgage in the first quarter of this year, according to the first-quarter Zillow Negative Equity Report. Collectively, underwater homeowners owed $1.2 trillion more than their homes were worth. Negative equity rose slightly from 31.1% in the fourth quarter of 2011, and declined from 32.4% in the first quarter of last year.

Zillow reports that nearly 40% of underwater homeowners -12.4% of all homeowners with a mortgage – owe between 1% and 20% more than their home is worth. An additional 21% of underwater homeowners – 6.6% of all homeowners with a mortgage owe between 21% and 40% more than their home is worth. About 2.4 million – 4.7% of all homeowners with mortgages – owe more than double what their home is worth.

Despite the high rate of negative equity, Zillow says that the majority of underwater homeowners are current on their mortgages: nine out of 10 continue to make their mortgage and home loan payments on time, with just 10.1% of underwater homeowners more than 90 days delinquent.

On a state level, Nevada has the highest percentage of negative equity, with 66.9% of all homeowners with mortgages underwater. Arizona (52.3%), Georgia (46.8%), Florida (46.3%) and Michigan (41.7%) also have the highest percentages of homeowners in negative equity.

‘While it was disappointing to see negative equity numbers remain so high, it is important to note that negative equity remains only a paper loss for the vast majority of underwater homeowners,’ says Zillow Chief Economist Stan Humphries. ‘As home values slowly increase and these homeowners continue to pay down their principal, they will surface again. That said, negative equity remains an issue for the housing market as a whole, and poses a risk to any recovery. Not only does negative equity tie many to their homes, by making homeowners unable to move when they may want to, but if economic growth slows and unemployment rises, more homeowners will be unable to make timely mortgage payments, increasing delinquency rates and eventually foreclosures.’


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