Negative Equity Lingers in Both Urban and Suburban Areas

Five years into the recovery of the U.S. housing market, 12 percent of homeowners are still underwater, with the worst of it hitting Las Vegas and Chicago, according to new data from Zillow and  ATTOM Data Solutions.

Negative equity was down from 12.7 percent in Q1 and from 14.4 percent last year, and did not discriminate between urban and suburban areas. Overall, negative equity was mostly even between urban and suburban areas, though large disparities favoring greater numbers of underwater borrowers did show up in Cleveland and Detroit, according to Zillow.

According to ATTOM, there were almost 12.4 million equity-rich properties‒‒22.1 percent of the U.S. market‒‒at the end of Q2 2016. That’s up from a flat 22 percent from Q1 and from 19.6 percent in Q4 2015.

"At its worst, negative equity touched all kinds of homeowners in all kinds of markets," said Zillow Chief Economist Svenja Gudell. "Fast-forward a few years and the relative vibrancy of a given community and how it has performed over the past few years, and not necessarily its location in the city or suburbs, matters a great deal."

ATTOM’s Q2 U.S. Home Equity and Underwater Report identified 6.66 million seriously underwater properties, or 11.9 percent of all U.S. residential properties.

“Rising home prices are lifting all home equity boats: bailing out seriously underwater homeowners and enriching homeowners who already have positive equity,” said Daren Blomquist, senior vice president at ATTOM. “Nationwide home prices reached a new all-time high in June on the heels of 52 consecutive months of annual increases. While that national trend is consistent in most markets across the country, there are still some local markets and sub-markets that have been largely left behind by the housing recovery and which still have a high percentage of underwater homeowners.”

According to Zillow, all of the largest markets in the country now have negative equity rates below 20 percent for the first time ever. The highest rates were in Las Vegas and Chicago, both averaging just over 17 percent.

ATTOM’s data, however, painted a worse picture among the 88 metros it studied. ATTOM found several metros to have underwater rates above 20 percent, most notably Cleveland at 27.5 percent and Las Vegas at 25.7. Chicago showed 22.5 percent on ATTOM’s report.