Slowing Home Appreciation Means Positive Equity Distant for Underwater Borrowers

According to the analytic firm Zillow, 10.8 million homeowners still owe more than their house is worth, a drop of over 4.9 million from the high point of Q1 2012, which represents a 21 percent decline when the negative equity peak was 31.4 percent of all homeowners. In Q2 2013 the negative equity rate hit 23.8 percent, representing the largest quarter-over-quarter drop since Zillow began following the trail of negative equity in Q2 2011, according to nationalmortgagenews. Stan Humphries, the firm’s chief economist, says, “Rising home prices and a greater willingness among lenders to engage in short sales have both contributed substantially to the significant decline in negative equity this quarter (Q3 2013). We should feel good that we’re moving in the right direction and at a fast clip.” If home price values fall in 2014 as predicted by Zillow and others, the pace of negative equity improvement will slow, falling to only 18.8 percent. As MHProNews has learned, home values that increase by Zillow’s prediction of 3.8 percent next year would require a homeowner underwater by 20 percent five years to reach positive equity. Humphries says, “Negative equity must be considered part of the new normal in the housing market.”

(Image credit: news365today)

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