Negative equity rate falls to 13.1% in the US in fourth quarter of 2015

Fewer home owners in the United States were underwater as the negative equity rate fell to 13.1% in the fourth quarter of 2015, according to the latest data to be published.

But more than 820,000 underwater home owners still owe over twice as much on their mortgages as their homes are worth, a reminder that some owners may not see positive equity in their homes in the foreseeable future.

The data from the Zillow Negative Equity Report also shows that six million home owners were still in negative equity, which means they owe the bank more than their homes are worth. A year ago eight million home owners were upside down on their mortgages.

The report explains that over time, negative equity can act as an anchor on a housing market, preventing underwater homeowners from listing their homes and re-entering the market. It is more prevalent in less expensive areas that are affordable to first time buyers. Without these homes available, many potential buyers are side lined and unable to take advantage of mortgage rates that remain near historic lows.

It also points out that in the past year, millions of underwater home owners resurfaced as the total amount of negative equity declined by $75 billion, but some owners are so far underwater that positive equity may be several years away, leaving them stuck in their homes unable to sell.

‘Even though the number of underwater homeowners has fallen significantly since the peak of the housing crisis, negative equity persists in many markets as it fell at its slowest pace in a year,’ said Zillow chief economist Svenja Gudell.

‘Things are moving in the right direction, but some owners are still deeply underwater. As we move into the home shopping season, inventory is already low, and negative equity is keeping potential additional stock from becoming available,’ she added.

Las Vegas still had the highest rate of negative equity at 20.9% followed closely by Chicago, where 20.5% of home owners were upside down on their mortgages. At the other end of the spectrum, in San Jose only 2.8% of mortgaged home owners were underwater.