Underwater Homeowners Sink Deeper, Even as Home Values Rise

The rate of homeowners who owe more on their mortgage than their homes are worth is stalled and even worsening in some places for the first time since the recession, according to a new Zillow report
– Home values continue to rise, but negative equity is going up in 21 of the largest 50 housing markets, indicating many underwater homes are not rising in value.
– More than a quarter of mortgaged homes are underwater in some markets in Florida and the Midwest. The national negative equity rate is 16.9 percent.
– Home values rose 5.9 percent nationally last year. Low-end homes are far more likely to be worth less than the balance of their mortgage.
Owners of homes at the bottom of the market are trapped underwater on their mortgages even as the real estate market continues to recover, according to the fourth quarter Zillow® Negative Equity Report[i]. That’s because low end[ii] homes – the most likely to be upside-down — are losing value.

At the peak of the real estate crisis, more than 15 million homeowners owed more on their mortgages than their homes were worth, putting them in negative equity. Foreclosures, short sales and rapidly rising home values freed nearly half of those homeowners, but now that trend has reversed in many metros. Three years into the recovery, home values overall continued to recover while owners of the lowest-valued homes – those most likely to be stuck in negative equity – were left behind.

“Higher negative equity rates have become the new normal,” said Zillow Chief Economist Dr. Stan Humphries. “We’ve long been expecting the negative equity rate to fall more slowly as home value growth also slows, and unfortunately that’s exactly what we’re seeing. Compounding the problem is the fact that negative equity is decidedly not an equal opportunity predator, and looms larger over the bottom 10 percent of homes, where homeowners are least prepared to withstand the assault.” In the fourth quarter of 2014, the negative equity rate worsened in 21 of the top 50 U.S. markets. Nationally, home values rose around six percent in 2014.

Less valuable homes are much more likely to be underwater. For example, in Atlanta, 49 percent of homes in the bottom-third of home values are in negative equity, compared to 11 percent of mortgaged homes in the highest valued third.

Nationally, 16.9 percent of all homes with a mortgage are in negative equity, and that is expected[iii] to fall to 15.4 percent by the end of 2015. Among large metros, Virginia Beach (28.3 percent), Jacksonville (27.0 percent),Las Vegas (26.4 percent), and Atlanta (26.1 percent) had the highest rates of negative equity.

Metropolitan Area Q4 2014 Negative Equity Rate Percentage-Point Change in Negative Equity Rate Since Q3 2014 Q4 2014

Negative Equity Rate Among Low-End Homes

Percentage-Point Change in Low-End Negative Equity Rate Since Q3 2014 Overall Year-Over-Year Home Value Change
UNITED STATES 16.9% -0.1 27.3% 0.0 5.9%
New York-Northern New Jersey 13.1% -0.5 25.0% -0.4 4.2%
Los Angeles 8.6% -0.8 13.3% -1.3 5.1%
Chicago 25.1% -0.2 41.5% 0.1 4.7%
Dallas-Fort Worth 8.6% -0.7 14.6% -0.5 8.3%
Philadelphia 19.1% 1.0 34.3% 1.5 4.6%
Houston 7.5% 0.1  N/A N/A 12.3%
Washington 18.2% -0.2 30.7% -0.7 4.3%
Miami-Fort Lauderdale 19.0% -1.1 33.6% -1.4 14.0%
Atlanta 26.1% -1.0 49.0% -1.5 11.4%
Boston 9.8% 0.2 16.7% -0.4 3.7%
San Francisco 6.6% -0.8 12.6% -1.8 7.3%
Detroit 21.3% -0.8 50.2% 1.0 8.7%
Riverside 17.0% -1.2 25.9% -1.0 9.7%
Phoenix 20.6% -1.1 30.4% -1.3 4.6%
Seattle 15.6% -0.6 25.8% -1.8 6.4%
Minneapolis-St Paul 15.5% -0.1 26.3% -0.8 5.8%
San Diego 8.9% -1.2 13.2% -1.9 4.2%
St. Louis 22.8% 0.0 41.9% 0.6 2.4%
Tampa 21.2% -0.7 39.2% -0.8 9.5%
Baltimore 20.3% 0.2 33.4% 0.0 2.7%
Denver 7.7% -0.5 11.1% -1.7 14.0%
Pittsburgh 12.1% 1.3 23.5% 2.7 5.2%
Portland 10.9% -0.3 16.5% -1.0 5.7%
Sacramento 14.8% -0.9 22.4% -1.1 7.3%
San Antonio 12.3% 0.1 N/A N/A 5.5%
Orlando 20.9% -0.9 35.4% -1.0 10.0%
Cincinnati 19.2% 0.5 35.3% 0.6 4.9%
Cleveland 21.4% 0.7 42.6% 1.5 2.8%
Kansas City 20.9% 0.2 42.8% 0.8 5.7%
Las Vegas 26.4% -1.4 40.6% -1.1 10.7%
San Jose 4.0% -0.5 7.0% -1.0 10.1%
Columbus 17.6% 0.0 36.0% 0.1 5.2%
Charlotte 16.3% -0.2 25.9% -0.9 5.5%
Indianapolis 18.3% 0.3 N/A N/A -1.1%
Austin 7.9% -0.1 N/A N/A 11.1%

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/underwater-homeowners-sink-deeper-even-as-home-values-rise-300053532.html

SOURCE Zillow

For further information: Emily Heffter, Zillow, 206-757-2701 or [email protected]