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As the housing market continues to recover, homeowners who are underwater on their mortgages are increasingly concentrated in the Rust Belt, while West Coast homeowners are less likely to be in negative equity, according to the first quarter Zillow® Negative Equity Report.

Nationally, 12.7 percent of homeowners with a mortgage were in negative equity, meaning they owed more on their mortgage than their homes were worth. U.S. negative equity is down from a peak level of 31.4 percent in the first quarter of 2012.

For years, Las Vegas has been the prime example of the housing bubble and bust, with nearly three-quarters of mortgaged homeowners underwater when the market bottomed out in in the first quarter of 2012. But Chicago now has the highest negative equity rate among large U.S. markets, surpassing Las Vegas in the first quarter of 2016. At its worst, Chicago had a 41.1 percent rate of negative equity, but its recovery has been sluggish and the negative equity rate has declined more slowly than elsewhere.

As the housing market recovered, the distribution of underwater homeowners across the country has shifted. In the first quarter of 2012, the West Coast, Southeast, and Rust Belt regions had a disproportionately greater share of underwater homeowners. For example, the Southeast had 20.4 percent of homes with a mortgage, but 24.9 percent of homes in negative equity.

Four years later, the West Coast, home to hot markets like the Bay Area, Portland, and Seattle, has only 10.2 percent of homeowners with negative equity, but 15.2 percent of all mortgaged homeowners. The imbalance was worst in the Rust Belt region, which includes Wisconsin, Illinois, Indiana, Michigan and Ohio, and which had an unevenly large share of underwater homeowners.

“When the housing bubble burst, the West Coast had more than its fair share of underwater homeowners,” said Zillow Chief Economist Dr. Svenja Gudell. “But the strong local economy and job markets have significantly helped these housing markets recover, and several are now more expensive than they were during the housing bubble. Other parts of the country didn’t get those same benefits, and until market fundamentals improve, homeowners and buyers in these areas will be facing disproportionately higher levels of negative equity as they navigate the housing market.”

Four of the 10 metros with the highest rates of negative equity are in the Rust Belt. Meanwhile, the West Coast is home to five of the 10 metros with the lowest levels of negative equity.

To see the full report, click here.