Percentage of underwater homeowners plummets

by Ryan Smith22 Nov 2013
The percentage of underwater homeowners fell at the fastest pace on record in the third quarter, according to data released Thursday.

The national negative equity rate fell to 21% of all homeowners with a mortgage in the third quarter, down from its Q1 2012 peak of 31.4%, according to a report released Thursday by Zillow. In the third quarter, more than 1.4 million homeowners got their mortgages above water, and nearly 5 million have been freed from negative equity since the beginning of 2012, Zillow reported.

The fall-off in negative equity during the third quarter was driven by high rates of home value appreciation, Zillow reported. Sacramento saw the highest level of appreciation at 34.1%. Also among the top areas for price appreciation were Las Vegas (33.3%), Riverside, Calif. (31.8%), San Francisco (25%) and Detroit (23.3%).

However, about 10.8 million homeowners are still underwater, and the national effective negative equity rate – in which the loan-to-value ratio is more than 80% -- is 39.2%. Not all of those homeowners are underwater, but they don’t have a lot of equity in their homes – making selling and buying a new home difficult, Zillow reported.


  • by Brett 11/22/2013 10:17:43 AM

    If you originally buy the home with only 5% down, or less, it will take a while to get above the 80% LTV threshhold even with modest price appreciation. Most of your payments the initial years of the mortgage are going towards interest, not principal. For example, on a $150,000 mortgage at 4.5% for 30 yrs, making P&I payments of $760/mo, you would have only paid down $13,264 of principal after 5 yrs. With 2% annual appreciation it would still take over 4 yrs to get below 80% LTV.


Is TILA-RESPA a good or bad thing long term?