Since the financial crisis of 2008, mortgage delinquencies have steadily decreased. During the peak of the recession, over 30 percent of homeowners owed lenders more than the value of their home. Now, underwater mortgages have dipped below the 10 percent mark, to 9.1 percent, for the first time since the housing crisis, according to Zillow’s recently released 2017 Q4 Negative Equity Report.
Despite the progress, nearly 4.5 million U.S. homeowners are still underwater on their mortgage. Their inability to sell at a loss impacts today’s market, prompting further inventory shortages that are causing home values to increase.
“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,” says Aaron Terrazas, senior economist at Zillow. “But scattered in neighborhoods across the country, the legacy of the mid-2000s housing bubble and bust lingers among the millions of Americans still underwater on their mortgages, trapped in their homes with no easy options 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.”
Where are homeowners struggling the most? The metro areas with the highest negative equity rates are Virginia Beach, Va. (16.7 percent), Chicago, Ill. (15.5 percent), Baltimore, Md. (14.2 percent), Cleveland, Ohio (13 percent) and St. Louis, Mo. (12 percent), according to the report.
Some homeowners are finding it impossible to dig out of their financial debt, as they owe lenders at least double the value of their home—in Detroit, Mich., it’s 25.4 percent of those who are underwater on their mortgage, while in Cleveland, Ohio, it’s 22 percent, and in Chicago, Ill., it’s 20 percent.
For more information, please visit www.zillow.com.