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Nearly 16M Homes Are Now Underwater

Zillow just reported that their data shows nearly 16 million homes in this country are now in a negative equity position where the house is worth less than the mortgages on the home. This number is dramatically higher than the approximate 11 million reported by other entities. Why the huge difference? Zillow professes to take into consideration ALL loans on the property not just the most recent loan (purchase or refinance).

The key findings in the study:

  • Nearly one-third (31.4 percent) of U.S. homeowners with mortgages – or 15.7 million – were underwater on their mortgage.
  • A slower pace of foreclosures after the robo-signing issues of 2010 contributed to slower progress in working down negative equity. Foreclosures cause homes to come out of negative equity when a bank or third party takes ownership.
  • Nine in 10 homeowners continue to make their mortgage and home loan payments on time, with just 10.1 percent of underwater homeowners more than 90 days delinquent.
  • Nearly 40 percent of underwater homeowners, or 12.4 percent of all homeowners with a mortgage, owe between 1 and 20 percent more than their home is worth.
  • An additional 21 percent of underwater homeowners, or 6.6 percent of all homeowners with a mortgage, owe between 21 and 40 percent more than their home is worth.
  • About 2.4 million, or 4.7 percent of all homeowners with mortgages owe more than double what their home is worth.

How can negative equity impact the housing market? In the report, Zillow Chief Economist Stan Humphries explains:

“Not only does negative equity tie many to their homes, by making homeowners unable to move when they may want to, but if economic growth slows and unemployment rises, more homeowners will be unable to make timely mortgage payments, increasing delinquency rates and eventually foreclosures.”


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8 replies
  1. Susan Bragg
    Susan Bragg says:

    Guess what? Zillow doesn’t know everything. Their “zestimates” are so off base (either high or low) and are not helpful to either buyers, or sellers. They are not Realtors, just statisticians…and not always accurate. They have done more damage than good.

    Reply
  2. mrkrispy
    mrkrispy says:

    You’re citing Zillow as an authority on house values?  You can’t be serious!  KCM Crew, this is a major FAIL!!!  So the obvious result of this kind of poor quality “journalism” is the question “What else do you say that has no credibility?”

    Reply
  3. James K Barath, CMPS
    James K Barath, CMPS says:

    Negative equity is only a reality when the home is sold; otherwise, it is a mute point and has no direct correlation to one’s ability to afford a mortgage payment. If anything, the headlines of negative equity has only perpetuated the acceptability of strategic defaults.

    Reply
    • mrkrispy
      mrkrispy says:

       you meant moot point……  Also, negative equity affects a persons real net worth today…which can affect their ability to get loans for a variety of things such as business loans and/or personal loans, their outlook on their future, and their ability to consider a job change that would require relocation.  For at least 30 percent of home owners the short term ramifications of a strategic default are far less costly than the longer term benefits.  Unfortunately that’s the current reality.   

      Reply
  4. rogersanderson
    rogersanderson says:

    From a California perspective, 16 million underwater homes is a very reasonable estimate.  My concern for the real estate market and for real estate values is that the unethical strategic defaulters of this world will suddenly just start walking away and we have 8 million additional foreclosures with 2 million of them being in California. 

    Reply

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