Photo: Robert Clark
Ten years after the collapse of the US housing market, the share of homeowners underwater on their mortgages has dropped considerably.
But with an estimated 4.4 million homeowners still underwater on their mortgages, these homes could go a long way to ease the inventory crisis and meet rising Millennial demand, according to a newly released report by the listing site Zillow.
The share of homeowners currently underwater is currently 9.1 percent — falling below 10 percent the first time since the housing market collapse. Zillow estimates that 713,000 of the 4.4 million homeowners currently underwater on their home loans owe more than twice their home’s value.
“For much of the country the Great Recession is an increasingly distant memory — the American economy is booming once again and markets are now shifting their gaze to future downturn risks,” Zillow Senior Economist Aaron Terrazas says in the digital release.
The typical US home lost more than a quarter of its value when the market crashed 10 years ago. Millions of homeowners were sent into negative equity — meaning, a home’s value is lower than the balance on a mortgage — during the collapse.
Now with national home values higher than ever, many owners who were able to hold onto their homes throughout the housing crisis have now been able to resurface on their mortgages.
Low inventory is one of the main factors currently driving home values higher, as demand from Millennials, the largest group of homebuyers, exceeds the available supply. Underwater homeowners are contributing to the housing shortage by holding onto their homes instead of selling for a loss.
And with national home inventory levels remaining well below historic levels, the struggle of these homeowners who are trapped in their homes as they try to regain positive equity are sending ripples throughout the market.
For these millions of homeowners still underwater on their mortgages, there is no easy option to regain equity other than waiting.
“Their struggles mean there are fewer homes on the market for homebuyers today. In corners of the country where home values have been stagnant in recent years, recent homebuyers can easily fall underwater, particularly those who buy with small down payments,” Terrazas says.
Some 15.4 percent of homeowners with a mortgage have some equity in their home, but it’s not enough to sell their current home and put the proceeds towards a downpayment on another home.
Meantime, Detroit, MI has the largest share of homeowners “deep” underwater, or those who owe upwards of 200 percent on their home Just over 25 percent of Detroit homeowners (with a mortgage) owe at least double the value of their home — 9 percent about the national average.
This equates to about 22,000 Detroit homeowners that are deep underwater on their home loans.
Click here to read the entire release.