Number of homeowners with underwater mortgages decreases
November, 2012
According to the third quarter Zillow Negative Equity Report, negative equity decreased in the the quarter, with 28.2 percent of all homeowners reporting having underwater mortgages.
The 28.2 percent of homeowners who reported they were underwater on their mortgages decreased from the 30.9 percent that was reported in the second quarter of the year, signaling improvement in the housing market.
After years of showing historically low numbers, the housing market is finally beginning to show signs of life, as home prices and sales are beginning to increase across the country.
This is also the first time that negative equity has decreased below 30 percent in the Zillow report and the figures were the largest quarter-over-quarter decrease in negative equity since Zillow revised its way of determining negative equity in the first quarter of 2011.
"The fall in negative equity rates means homeowners have additional options for refinancing or selling their homes," said Zillow Chief Economist Dr. Stan Humphries. "But while we're moving in the right direction, a substantial number of homes are still locked up in negative equity, unable to enter the existing re-sale market despite the desires of their owner. The housing market has found real momentum of its own, but is not immune from shocks to the broader economy."
Humphries added that if negotiations focused on resolving the fiscal cliff aren't inspiring confidence in investors and consumers, recent home value increases and falling could stall.
Out of the 30 largest metropolitan areas that are covered by the Zillow report, the five that had the largest declines in negative equity were Phoenix, Las Vegas, Denver, Sacramento, California, and Orlando.
A large portion of the decline in negative equity is credited to U.S. home values rising by 1.3 percent in the third quarter of the year compared to the second quarter, to a median value of $153,800.
More than 14 million U.S. homeowners that have a mortgage in negative equity owed more on their mortgage than their homes were worth, which has sparked the government to combat these cases to make sure that first-time home buyers receive lower rates through FHA loans that require a lower down payment than others.
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