Fewer homes are underwater, but it’s not making much of a difference

The recession’s over and the housing market has recovered, right? Not totally. One in 10 homeowners with a mortgage remains underwater.

Even if that’s not you, it could affect you. While home values are trending up, the fact these people owe so much more than their houses are worth means it’s still harder than it should be to buy. Zillow calls this negative equity “an anchor” dragging down the market.

“Negative equity is one of the most persistent reminders of the long-term losses suffered when the housing market collapsed,” says Zillow chief economist Svenja Gudell. “Accelerating home value appreciation over the past few months was a blessing to owners who have been underwater since the housing bubble burst, but not all underwater owners were able to ride that wave to positive equity.”

“We are in for many more years of elevated levels of negative equity. Even as median home values close in on peak levels reached during the housing boom; some people still face a long wait before returning to a positive balance on their home loans,” he added.

Who is still drowning?

Some areas are faring better than others. Most West Coasters are doing quite well. All major metro areas have some of the lowest rates of negative equity, according to Zillow.

San Jose had the lowest with 2.7 percent of mortgaged homeowners in negative equity, while San Francisco came in second with 3.6 percent. Portland, Oregon was at 4 percent.

Las Vegas and Chicago — at 16.6 and 16.5 percent respectively — had the highest rates of underwater mortgages. But both were more than 20 percent a year ago, which means they had some of the highest levels of improvement. Virginia Beach had the most improvement: a 5.8 percentage point drop from 2015 to 2016.

At the end of 2015, nearly 47 percent of homes were within 20 percent of positive equity. A year later, that number dropped a bit to 44.5 percent.

Unfortunately, some places are seeing a surge of underwater homes, not a drop. While Virginia Beach had a great improvement with residents going from negative to positive, the metro area still has among the most underwater homes in the country, with 49.2 percent of residents within 20 percent of positive equity. This time last year they were at 16.4 percent — that’s three times as many on the brink!

Virginia Beach isn’t the only place that is seeing a huge spike in deep underwater mortgages. Milwaukee more than doubled from 2015 to 2016, going from 20.7 percent to 41.6 percent. Providence, Rhode Island also more than doubled in the same time span, going from 21.2 percent to 46.3 percent, and Nashville spiked from 17.7 to 37.2.

Meet the Author

Dori Zinn

Dori Zinn


Zinn is a freelance journalist based in Fort Lauderdale, Florida.

Credit & Debt, Family

economy, homebuyers, homeowners, mortgages, real estate

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Article last modified on January 15, 2018 Published by Debt.com, LLC . Mobile users may also access the AMP Version: Underwater Homes Surface — Barely - AMP.