Underwater Homes Recede to Below 20% in U.S.

u.s. map of underwater mortgages

By Camille Salama

The share of U.S. homeowners who owe more on a home than it's worth has dropped below 20 percent for the first time in years, according to Zillow's fourth quarter Negative Equity Report. As home values have continued to rise over the past year, millions of so-called "underwater" homeowners have come up for air and are finally able to put their home on the market. This increase in inventory should, in turn, help create a more balanced home-shopping season than we've seen in the past few years, with buyers having more choice and perhaps less competition.

According to the most recent numbers, nearly 10 million people were underwater on their mortgage in the fourth quarter 2013, collectively owing $657 billion more than their homes are worth. But the number of underwater homeowners is slowly but surely receding. Almost 3.9 million U.S. homeowners were freed in 2013, and the negative equity rate fell to 19.4 percent at the end of the fourth quarter, from 27.5 percent at the same time in 2012.

Nationwide, the negative equity rate is expected to fall to 17.2 percent by the end of 2014, signaling further stabilization of the market and likely freeing up even more inventory. The detailed Zillow Negative Equity Report is also available on the Zillow Real Estate Research page.

More about home values from Zillow:
November Home Values Remain Strong
In October, Healthiest Housing Markets Were Out West
Understanding Mortgage Closing Costs

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