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Nearly 2 Million American Homeowners Freed From Negative Equity In 2012
Svenja Gudell / Zillow / February 20, 2013
According to the fourth quarter Zillow Negative Equity Report, the national negative equity rate continued to fall in the fourth quarter of 2012, dropping to 27.5 percent of all homeowners with a mortgage from 28.2 percent in the third quarter. The fourth quarter result also represents a significant decline from the one year ago level of 31.1 percent in the fourth quarter of 2011. Overall, almost 2 million American homeowners were freed from negative equity over the course of the year. However, 13.8 million homeowners with a mortgage remain underwater (Figure 1). Of all homeowners – roughly one-third of homeowners do not have a mortgage and own their homes free and clear – 19.4 percent are underwater.
Strong appreciation and elevated foreclosure liquidation rates continue to be the main factors reducing negative equity levels across the nation. In 2012, home values appreciated by 5.9 percent nationally, while some regions saw even stronger appreciation. Figure 2 shows the relationship between 2012 appreciation rates and the decline in negative equity over 2012. Despite these high rates of appreciation, negative equity is still very high and will remain high as deeply underwater homeowners are slowly being lifted toward positive equity. Figure 3 shows the loan-to-value (LTV) distribution for homeowners with a mortgage in the nation in 2012 Q4 vs. 2011 Q4. Even though many homeowners are still underwater and haven’t crossed the 100% LTV threshold to enter into positive equity, they are moving in the right direction. The 2012 Q4 buckets on the 100%+ LTV side (the red bars) are getting smaller compared with 2011 Q4, and the black bars are getting taller. In total, underwater homeowners owe $1.01 trillion more than their homes are worth. On average, a U.S. homeowner in negative equity owes $73,055 more than what their house is worth, or 42.6 percent more than the home’s value (Table 1). While roughly a quarter of homeowners with a mortgage are underwater, 91.1 percent of these homeowners are current on their mortgage and continue to make payments.