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Bloomberg: U.S. Homeowners With Negative Equity Drop as Prices Rise
The number of U.S. homeowners who owe more on their mortgages than their houses are worth fell by about 400,000 in the second quarter as prices rose and properties were lost to foreclosure.
About 15.3 million homeowners, or almost 31 percent of those with a mortgage, had negative equity as of June 30, according to Seattle-based Zillow Inc. (Z) That was a decline of a 0.5 percentage point from the first quarter, the real estate information service said today.
“It’s a positive signal,” Zillow Chief Economist Stan Humphries said in a telephone interview. “Negative equity has definitely gummed up the workings of the housing market.”
Underwater homeowners have a higher foreclosure rate and a harder time relocating, because they would lose money in a sale, Humphries said. The problem is greatest among borrowers under age 40, about 48 percent of whom owe more than their homes are worth. That’s slowing the housing recovery by shrinking the inventory for first-time buyers and reducing demand for move-up homes, Humphries said.
Total negative equity was $1.15 trillion in the U.S. at the end of the second quarter, a $42 billion decline from three months earlier, according to Zillow.
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