Zillow, Seattle, said the number of homeowners underwater on their home loan continued to fall in the fourth quarter, but more than half of those who remain underwater owe at least 20 percent more than their homes are worth. The company’s 2016 Q4 Negative Equity Report noted the country’s negative equity rate fell to 10.5 percent of homeowners at the end of 2016, down from 13.1 percent of homeowners a year earlier. It noted 1.2 million homeowners in negative equity were able to resurface in 2016, gaining positive value in their homes, as home value appreciation accelerated toward the end of 2016. However, the report noted five million homeowners remain underwater, with less than half (44.5 percent) within 20 percent of reaching positive equity. Zillow Chief Economist Svenja Gudell said the depth of negative equity alone will ensure that negative equity will continue to be a drag on the housing market even after home values return to pre-crisis levels. “Negative equity is one of the most persistent reminders of the long-term losses suffered when the housing market collapsed,” Gudell said. “Accelerating home value appreciation over the past few months was a blessing to owners who have been underwater since the housing bubble burst, but not all underwater owners were able to ride that wave to positive equity. We are in for many more years of elevated levels of negative equity. Even as median home values close in on peak levels reached during the housing boom, some people still face a long wait before returning to a positive balance on their home loans.” Zillow said the rate of negative equity has declined each quarter since peaking at 31.4 percent in first quarter 2012. The decline of negative equity has slowed because most homes that were only slightly underwater have resurfaced as home values rebounded following the crash.
Source: The Mortgage Bankers Association