Negative Equity Rate Falls to 23.8%, But 'Still Very High'

Negative Equity Rate Falls to 23.8%, But 'Still Very High'The portion of homeowners “underwater” on their mortgages — known as the national negative equity rate — continues to slide, falling to 23.8 percent in the second quarter, from 25.4 percent in the first quarter of 2013, Zillow reports in its just-released update.
The negative equity rate, which counts borrowers who owe more than the value of their homes, has been falling for the past five quarters.
Year-over-year, the rate fell 7 percentage points from 30.9 percent in the second quarter of 2012.
In the second quarter of 2013, more than 805,000 American homeowners came out of negative equity, riding rising home values.
However, more than 12 million homeowners with a mortgage remain underwater.
“Despite these high rates of appreciation, negative equity is still very high and will remain high as deeply underwater homeowners are slowly being lifted toward positive equity,” Zillow reports. “This is a process that will take several years – especially in the hardest hit markets – to work off the high levels of negative equity.”
The effective negative equity rate nationally — where the loan-to-value ratio is more than 80 percent, making it difficult for a homeowner to afford the down payment on another home — is 41.9 percent of homeowners with a mortgage.
“While not all of these homeowners are underwater, they have relatively little equity in their homes, and therefore selling and buying a new home while covering all of the associated costs (real estate agent fees, closing costs and a new down payment) would be difficult,” Zillow said.
Of all homeowners – including the roughly one-third who do not have a mortgage and own their homes free and clear – 16.7 percent are underwater.
High rates of home value appreciation across the nation is the maindriver of lower negative equity levels.
Some of the hardest hit markets during the housing bust are now showing the highest rates of home value appreciation. These are in turn driven by high rates of negative equity.
Markets that have seen the highest levels in home value appreciation in July include these cities in California and Nevada: Sacramento (33.1 percent), Las Vegas (30.8 percent), San Francisco (27.8 percent), Riverside (27.3 percent) and San Jose (25.1 percent).

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