Approximately 12.2 million homeowners with a mortgage were in negative equity at the end of the second quarter, the Seattle-based real estate information provider said in a report. This figure is down from 13 million homeowners in 1Q13 and 15.3 million a year ago.
Even if home prices go up by 4.8% in the next year, it would take a homeowner who is 20% underwater about four years to reach positive equity, assuming appreciation continues at that rate going forward.
“Widespread rising home values during the past year have helped chip away at negative equity nationwide, helping many homeowners who were only modestly underwater to come up for air. For those homeowners who are deeply underwater, though, there is still a long row to hoe,” said Stan Humphries, chief economist for Zillow.
Overall, the negative equity rate for all homeowners with a mortgage is 23.8%. More than half (57%) of homeowners in negative equity are underwater by at least 20%. Furthermore, 13.4% of underwater borrowers owe more than twice what their properties are worth.
Among the 30 largest metropolitans areas covered by Zillow that have the highest percentage of mortgaged homeowners with negative equity in the second quarter are Las Vegas (48.4%), Atlanta (44%) and Orlando (39.8%).
Over the next year, Zillow is forecasting that the negative equity rate for homeowners with a mortgage will fall to at least 20.9%, which will help free 1.9 million borrowers from being underwater. The majority of these homeowners, Zillow said, that will fall into positive equity are anticipated to come from Los Angeles, Riverside, Calif., and Atlanta.
“The frustrating slow pace of negative equity declines in the face of such robust home value appreciation is a direct result of the fact that many people in the hardest-hit markets are underwater by an enormous amount,” Humphries stated. “Because of this, negative equity will be a factor in these markets for years to come, constraining the supply of homes for sale and keeping people out of the market who might otherwise get involved.”