More than one million homeowners with negative equity came up from under the surface in 2016, but some are still treading water, according to Zillow’s recently released 2016 Q4 Negative Equity Report. Just 10.5 percent of homeowners now owe more on their mortgage than the value of their home, a dip from 13.1 percent in 2015. Over half of those homeowners, however, owes 20 percent or more of their home’s value—and will continue underwater for some time, says Dr. Svenja Gudell, chief economist at Zillow.
“Negative equity is one of the most persistent reminders of the long-term losses suffered when the housing market collapsed,” Gudell says. “Accelerating home value appreciation over the past few months was a blessing to owners who have been underwater since the housing bubble burst, but not all underwater owners were able to ride that wave to positive equity. We are in for many more years of elevated levels of negative equity. Even as median home values close in on peak levels reached during the housing boom, some people still face a long wait before returning to a positive balance on their home loans.”
The metropolitan areas with the highest percentage of homeowners still in negative equity are Chicago, Ill., (16.5 percent); Virginia Beach, Va. (16.4 percent); Baltimore, Md. (14 percent); Cleveland, Ohio (13.7 percent); and Milwaukee, Wis. (13.5 percent), according to the report. Baltimore and Virginia Beach, however, have some of the highest percentages of homeowners within 20 percent of positive equity: 46.2 percent and 49.2 percent, respectively.
Homeowners in negative equity have been one of the drivers of the ongoing housing shortage, keeping their homes off-market while they work to recover equity lost in the recession.