Zillow: 1 in 5 American homes underwater
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About 22% of American homeowners now owe more on their property than it’s worth, the real estate website Zillow says. The figure for the first three months of this year is up a bit from the previous quarter, when about 18% were underwater, according to Zillow’s analysis of home values and mortgage data.
Plunging home values dragged more homeowners into negative equity -- Zillow says U.S. home prices in the first quarter of this year were down 14% from the same quarter a year ago, to a median of $182,378.
Those most in trouble are homeowners who purchased in the midst of the bubble, when lending standards were loose. Nearly 60% of mortgages issued in 2006 are now underwater. Now that lending has tightened, fewer recent purchasers are underwater, even with ongoing home-price declines. Zillow says about a third of mortgages written in 2008 are now underwater.
In the Los Angeles area, which includes Orange County, has practically the same negative-equity rate, about 20%, Zillow says. Stockton and Modesto have the highest percentages of homes underwater in California -- both at 51%. Las Vegas tops the nation with 67% underwater.
How this shakes out for individual homeowners varies -- those who can make their payments and want to stay in their homes can hang on despite their paper losses. Those who can afford their mortgages but want to sell may be more likely to hang on to wait for a market bottom, adding to the buyer-seller standoff that has kept prices from falling as fast in higher-priced areas.
Those who can’t make their payments will either have their loans modified, sell at a loss or lose their homes to foreclosure. All those scenarios, however, suggest a slow turnaround for the housing market.
Zillow’s Stan Humphries cites the latest negative-equity data as one reason he doesn’t see a recovery soon. ‘I’m doubtful that we’ll see the bottom until 2010,’ he said, ‘and thereafter it’s increasingly clear that we’re likely to have a long bottom before we see meaningful recovery in home values.’
-- Peter Y. Hong