Many housing markets have seen more homes become trapped underwater during the fourth quarter although the nationwide negative equity rate didn't change, according to analytic firm Zillow.
The Zillow Negative Equity Report found that 16.9% of mortgaged homes nationwide were in negative equity during the fourth quarter, the Seattle-based company said in a press release on March 20. That figure, which remained the same from the third quarter, is expected to drop to 15.4% by the end of 2015.
Even though nearly half of the 15 million homeowners who owed more than their homes were worth have surfaced from their situation - often through foreclosures, short sales or rising home values - the Zillow study found that this trend has begun to reverse.
In 21 of the top 50 U.S. housing markets, the negative equity rate grew during the fourth quarter, meaning more homeowners found their properties underwater.
Causing this reversal is the fact that as home value increases moderate, the negative equity rate begins to fall at a slower pace, Zillow chief economist Dr. Stan Humphries said in the release.
"Higher negative equity rates have become the new normal," Humphries said. "We've long been expecting the negative equity rate to fall more slowly as home value growth also slows, and unfortunately that's exactly what we're seeing."
Humphries added that homes in the lowest tier have not seen the positive changes in home value experienced by other segments of the housing market, making them more vulnerable to falling underwater.
While home values rose about 6% nationwide in 2014, the report argued the large number of cities experiencing worsening negative equity rates implies that lower-value home are not benefitting from the increases in home values.
Atlanta, one of the cities with the highest negative equity rates in the nation, was cited by the report as an example of this situation. The city's overall negative equity rate during the fourth quarter was 26.1%, but that rates is significantly higher for homes in the bottom third value-wise (44%) than in the top third (11%).
Along with Atlanta, the other cities with the highest negative equity rates across the country were Virginia Beach, Va. (28.3%), Jacksonville, Fla. (27.0%) and Las Vegas (26.4%). The report added that in some markets across the Midwest and Florida more than a quarter of homes were underwater.
