Millions of Homeowners Freed from Negative Equity

Wednesday, March 13, 2013 - Article by: Daniel - The Federal Savings Bank -

Homeowners across the country were freed from negative equity in 2012. According to the Zillow Negative Equity Report, almost 2 million homeowners escaped underwater situations throughout the year. Negative equity fell to 27.5 percent, compared to 31.1 percent a year ago.

At the end of the fourth quarter, Zillow reported there were approximately 13.8

million homeowners owing more on their mortgages than their home was worth. The number was at 15.7 million in the fourth quarter of 2011.

The Zillow Negative Equity Forecast for this quarter predicts the rate to fall to at least 25.5 percent by the fourth quarter of 2013. Zillow said that if the forecast is correct, more than 999,000 homeowners could escape negative equity by the end of the year.

Increased home values and high foreclosure rates were the main drivers for the drop in negative equity last year, according to Zillow.

Supply and demand is playing a major role in the recovery of the market, the report stated. Supply is diminishing while demand is increasing. Due to increased income, individuals who may not have been able to afford a home in previous years are now applying for mortgages. Historically low interest rates are also encouraging homebuyers to secure a loan now before the rates go up.

Zillow chief economist Stan Humphries said that as more homeowners are freed from negative equity some will be more likely to sell their home and help with easing the low inventory of homes for sale.

Low rate mortgages currently experienced in the market may also help homeowners who are underwater get back on track and free from negative equity.

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