Borrowers who owe more money to banks than their home is worth is slowing decreasing, however more than half of these borrowers are stuck in an underwater free fall with little to no hope of resurfacing. According to Zillow’s first quarter Negative Equity Report released Friday, although the negative equity rate is falling, more than 4 million homeowners owed the bank at least 20 percent more than the worth of their home.
Zillow reported that the U.S. rate of negative equity among mortgaged homeowners was 15.4 percent in first quarter of 2015, a decrease from 16.9 percent last quarter. More than 15 million homeowners owed more on their mortgages than their homes were worth, placing them in negative equity at the peak of the real estate crisis. Foreclosures, short sales, and rapidly rising home values saved 7.9 million of these homeowners from the pool of negative equity by the end of the first quarter. Those that remain underwater are expected to be the most severe cases to repair.
Yesterday, as mortgage rates crept up to 4 percent this week for the first time since November 2014, consumers responded with a decrease of mortgage applications by 9 percent, according to the Mortgage Bankers Association Builder Application Survey data for May 2015. The 30-year fixed-rate mortgage rose to 4.02 percent for the week ending June 11, 2015, according to Freddie Mac’s Primary Mortgage Market Survey. Meanwhile, mortgage applications dropped by 9 percent, compared to last month.