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Most Underwater Homeowners Still Paying Mortgages

Nearly a third of homeowners with mortgages, or roughly 16 million borrowers, remained underwater on their home loans in the first three months of this year, an analysis from the real estate site Zillow finds. Underwater borrowers owe more on their mortgages than the home is worth.

The percentage of underwater borrowers, 31.4, is up slightly from 31.1 percent in the fourth quarter of last year, according to Zillow’s “negative equity report,” released Thursday.

Zillow’s report looks at current outstanding loan balances for owner-occupied homes, and compares them with those homes’ estimated values. Loan data are provided by TransUnion.

Still, just because a homeowner is underwater does not necessarily mean that foreclosure is imminent. Nine out of 10 are continuing to make their loan payments on time, the report said, with just 10 percent more than 90 days delinquent.

And not all homeowners with negative equity are deeply underwater. About 40 percent owe 1 to 20 percent more than their home is worth, which is “fairly modest” negative equity, said Stan Humphries, Zillow’s chief economist. About 15 percent of borrowers — or about 2.4 million — owe more than double what the property is worth.

Mr. Humphries said it was disappointing to see negative equity levels remain so high because they remain a drag on the housing market and the economy, hampering borrowers’ ability to sell their homes and move. But for many, the losses are so far on paper only. As home values slowly increase, he said, and those borrowers continue to pay down their principal, they will “surface” again.

“Negative equity does not necessarily equal foreclosure,” he said, adding that some homeowners may not even know they are underwater, if they aren’t trying to sell their home and can afford their monthly payment. “Most people are holding in place and paying their mortgages.”

The magnitude of the problem varies by market. In Las Vegas, for instance, more than a quarter of all homeowners with mortgages owe more than double what their home is worth.

On a state level, Nevada has the highest percentage of homeowners with negative equity, with 67 percent underwater, Zillow found.  Arizona (with 52 percent), Georgia (47 percent), Florida (46 percent) and Michigan (42 percent) also have  high percentages of underwater homeowners.

Zillow has produced an interactive map to show the proportion of underwater homes in various markets.

Are you underwater on your mortgage, but still making payments? Do you expect your property’s value to recover? And how long do you think that will take?

 

To view this arcticle in the New York Times, please click here.

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