While negative equity rates continue to drop nationally from their 2012 peak, the share of homeowners underwater in the Rust Belt remains elevated, according to data from Zillow.

The negative equity rate, which measures the share of all homeowners with a mortgage who owe more than their home is worth, was 12.7% during the first quarter, down from 13.1% in the fourth quarter and 15.4% in the first quarter of 2015. The negative equity rate hit its peak in the first quarter of 2012 at 31.4% and has either fallen or held steady every quarter since then, Zillow said Wednesday.

As the share of underwater homeowners overall has fallen, the concentration has shifted from the Southwest and Southeast to the Rust Belt states. When negative equity was at its peak, areas in the so-called sand states had very high concentrations of underwater homeowners as negative equity maxed out at 71% in Las Vegas and 58% in Phoenix. Overall, 29% of the country's underwater homeowners lived in Nevada and Arizona in 2012 versus just 20% of all homeowners with a mortgage.

But those parts of the country have recovered. Today, 19.8% of the nation's homeowners with a mortgage lived in the "sand states," compared with 17.8% of homeowners with negative equity.

In the Rust Belt, the concentration of underwater homeowners has spiked over that same time from less than 20% to 23.7%. And the negative equity rates at the city level remain elevated — in Chicago the rate stands at 20.3%, higher than either Las Vegas or Phoenix. Nevertheless, Chicago's negative equity rate is down from in 2012, when it hit 41%.

The difference in progress stems largely from the boost given to the housing markets from local economies, according to Zillow chief economist Svenja Gudell.

"The strong local economy and job markets have significantly helped [housing markets on the West Coast] recover, and several are now more expensive than they were during the housing bubble," Gudell said in a news release.

"Other parts of the country didn't get those same benefits, and until market fundamentals improve, homeowners and buyers in these areas will be facing disproportionately higher levels of negative equity."


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