One-Third of US Homeowners Underwater

By Mike Colpitts

Nearly one out of three homeowners with a mortgage are underwater or owe more on their homes than they are presently worth, according to new research by Zillow sinking fast economists. The figure represents almost 16 million U.S. mortgage holders struggling to pay home loans.

However, foreclosure is not imminent for most underwater homeowners, with close to nine out of ten making home mortgage payments on time. Some 10.1% are delinquent on home loans, Zillow said.

The housing market has nearly $4 trillion in negative equity, according to Federal Reserve Bank economist William Emmons of St. Louis. Emmons says it would take $3.7 trillion to get homeowners on a level playing field with mortgage debt.

Almost a third or 31.4% of homeowners (15.7-million) were underwater on mortgages as of the end of the first quarter of 2012, Zillow said.

The firm incorporates data from Trans Union credit company to calculate statistics for its new negative equity report. The estimated value of a home is matched to mortgage debt and lines of credit, including home equity lines of credit and home equity loans.

The study covers over 800 metros and 2,100 U.S. counties across the nation. It is the only study that uses current outstanding loan balances on all mortgages to calculate negative equity.

An estimated 2.4 million homeowners with mortgages owe more than double than what their home is currently worth, and are viewed as the most likely to sustain foreclosures. In Las Vegas, which has been heavily devastated by the foreclosure crisis nearly 90,000 homeowners owe more than double.

“Negative equity remains an issue for the housing market as a whole, and poses a risk to any recovery,” said Zillow chief economist Stan Humphries. “Not only does negative equity tie many to their homes by making homeowners unable to move when they may want to, but if economic growth slows and unemployment rises, more homeowners will be unable to make timely mortgage payments, increasing delinquency rates and eventually foreclosures.”

An estimated 21% of underwater homeowners owe between 21 and 40% more than their home is worth. Only 12.4% of all homeowners with a mortgage owe between 1 and 20% more than their home’s current value.

Metropolitan Area Q1 2012:% of Homeowners w/ Mortgages in Negative Equity Q4 2011:% of Homeowners w/ Mortgages in Negative Equity % of Underwater Homeowners 90 Days+ Delinquent (Q1 2012)
United States 31.4% 31.1% 10.1%
New York 21.3% 20.1% 20.6%
Los Angeles 30.0% 28.6% 12.1%
Chicago 41.1% 39.2% 12.7%
Dallas-Ft. Worth, TX 30.7% 29.8% 6.7%
Philadelphia 25.0% 23.9% 11.2%
Washington DC 32.4% 32.0% 10.6%
Miami-Fort Lauderdale, FL. 46.4% 47.0% 26.8%
Atlanta 55.2% 54.2% 8.3%
Boston 22.0% 20.7% 8.1%
San Francisco 30.7% 29.0% 9.7%
Detroit 49.8% 50.2% 6.3%
Riverside, Calif. 53.4% 52.5% 12.3%
Phoenix 55.5% 57.8% 9.1%
Seattle 39.6% 38.4% 10.2%
Minneapolis-St. Paul, Minn. 39.9% 38.9% 5.2%
San Diego 35.6% 35.2% 9.7%
Tampa, FL. 48.3% 48.2% 18.6%
St. Louis 30.7% 31.1% 6.4%
Baltimore 31.4% 29.9% 11.4%
Denver 29.0% 30.2% 6.1%
Pittsburgh 16.7% 16.1% 5.7%
Portland, OR 34.3% 34.3% 8.2%
Sacramento, CA 51.2% 50.3% 9.0%
Orlando, FL 53.9% 53.8% 19.5%
Cleveland 33.9% 33.2% 9.1%
Las Vegas 71.0% 70.2% 14.3%