The percentage of U.S. homeowners with mortgage debt that exceeds the value of their home declined slightly from the second to third quarters, in part because home prices are stabilizing but also because many homeowners who had been underwater lost their homes to foreclosure, Zillow.com reported today.
An analysis of public records collected for the Zillow Real Estate Market Reports suggests that 21 percent of homes with mortgages were underwater at the end of September, down from 23 percent at the end of June, Zillow said.
An index measuring home values in 156 metropolitan statistical areas (MSAs) tracked by Zillow was relatively flat, declining 0.4 percent from the second quarter to the third. Looking back a year, the index showed the median value of single-family homes, condominiums and cooperatives in those markets falling 6.9 percent, to $190,400.
But the rate of year-over-year price declines shrank for the third quarter in a row. Only nine MSAs — including the Merced, Calif., State College, Pa., and Salisbury, Md., MSAs — showed increasing year-over-year declines.
The index showed home values increasing in the last year in 24 of 156 MSAs, including Boston and Milwaukee, and holding their ground in 16 others.
The best-performing markets in the last year were Fayetteville, N.C. (up 10.8 percent); Cumberland, Md. (up 9.1 percent); Gainesville, Ga. (up 7.7 percent); Rochester, N.Y. (up 6.2 percent); and Green Bay, Wis. (up 5.3 percent).
"The decline in the percentage of homeowners with negative equity is a positive sign, and is directly attributable to the stabilization of home values from the second quarter to the third," Zillow Chief Economist Stan Humphries said in a statement. "It is also attributable to many homeowners who were previously underwater on their mortgage losing their homes to foreclosure."
A majority of homeowners with mortgages in several markets hard hit by foreclosures had negative equity in their homes. According to Zillow’s analysis, in Las Vegas 81.8 percent of homes with mortgages are underwater, and in Fort Myers, Fla., 60.5 percent of homeowners with loans have negative equity (some homeowners don’t have mortgages because they have paid off their loans or purchased their homes with cash).
Foreclosure resales accounted for 21.4 percent of all U.S. home sales in September, Zillow said, and more than half of sales in several MSAs including Las Vegas (67.5 percent) and the California communities of Merced (74.2 percent), Stockton (69.3 percent), Madera (68.7 percent), and El Centro (68.1 percent). …CONTINUED