Negative Equity: Nearly Half of Borrowers Under 40 are 'Underwater'

Negative equity declined slightly in the second quarter, with 30.9 percent of U.S. homeowners  – or 15.3 million – with mortgages underwater, compared to 31.4 percent in the first quarter.
The total amount of negative equity declined by $42 billion in the second quarter to $1.15 trillion, according to the latest update from Zillow.com on the nation’s homeowners who owe more on mortgages than the value of their homes.
Among age groups, young people are more affected by negative equity than other groups, with nearly half (48 percent) of all borrowers under the age of 40 underwater, Zillow reported.
However, younger borrowers are less likely to be delinquent on their mortgages.
Underwater borrowers between the ages of 20 and 24 are the least likely to be delinquent, with 5.9 percent more than 90 days late. That compares to a 9.2 percent delinquency rate for all underwater borrowers.
“Rising home values in the second quarter caused a decline in the number of underwater borrowers, but young homeowners continue to be disproportionately affected by negative equity,” said Zillow Chief Economist Dr. Stan Humphries.
Negative equity is “trapping” young people in their homes, preventing them from selling, a common scenario for many underwater homeowners.
But these homes are likely the starter homes that many first-time homebuyers are seeking, and the younger underwater homeowners are missing out on the opportunity to sell in a market with tight inventories.
Of the 30 largest markets tracked by Zillow, negative equity fell the most from the first to the second quarter in the Phoenix metro (from 55.5 percent to 51.6 percent) and the Miami-Ft. Lauderdale metro (from 46.4 percent to 43.7 percent).
The Las Vegas metro continues to see the highest negative equity rate, with 68.5 percent of borrowers underwater. That was down from 71 percent in the first quarter.

Leave a Reply

Your email address will not be published. Required fields are marked *