That’s according to Zillow
’s recent Negative Equity Report. While the national negative equity rate fell to 18.8% in the first quarter, that still leaves almost 10 million homeowners owing more than their houses are worth.
And more than a third of homeowners are “effectively underwater,” unable to sell their homes at enough of a profit to meet expenses related to the sale and make a down payment on a new home.
And the negative equity falls disproportionately upon those with cheaper homes. Almost one in three homes at the bottom third of the price spectrum was underwater in the first quarter, according to Zillow. Meanwhile, 18.1% of homes in the middle range were underwater while only 10.1% of homes at the top price tier had negative equity.
“The unfortunate reality is that housing markets look to be swimming with underwater borrowers for years to come,” said Zillow Chief Economist Dr. Stan Humphries. “It's hard to overstate just how much of a drag on the housing market negative equity really is, especially at the lower end of the market, which represents those homes typically most affordable for first-time buyers. Negative equity constrains inventory, which helps drive home values higher, which in turn makes those homes that are available that much less affordable.”
Affordable homes favored by first-time home buyers are in short supply nationally in large part because those homes are almost three times as likely to be underwater than more expensive homes.