Younger borrowers are more likely to be affected by negative equity in part because they generally have been in their home for shorter periods of time and had less time to build equity before the housing debacle. But on the bright side, younger borrowers tend to be in relatively “shallow” water compared to older borrowers and are less likely to be delinquent on payments, said Stan Humphries, chief economist at Zillow.com.
The disproportionate impact on younger borrowers may actually have a helpful effect on home values, by creating tight inventory of homes for sale. Younger borrowers trapped by negative equity tend to be reluctant to sell, even though their homes are often the most attractive to first-time buyers who might be ready to plunge into the market. “Sellers don’t want to sell, even if buyers want to buy,” he said.
When they do sell, prices are higher — which helps push values up. The process is actually moving the market toward recovery, but it’s a gradual process, he said. “Over all, the second-quarter report is positive,” said Mr. Humphries. “The housing market is healing, albeit slowly.”
These results come from the second edition of the new Zillow Negative Equity Report, which looks at current, outstanding loan amounts for individual, owner-occupied homes, and compares them to those homes’ current estimated values.
Of the 30 largest markets tracked by Zillow, negative equity fell the most from the first to the second quarter in the Phoenix metropolitan area (from nearly 56 percent to about 52 percent) and the Miami-Fort Lauderdale area (from 46 percent to roughly 44 percent). The Las Vegas market continues to have the highest rate of negative equity, with nearly 69 percent of borrowers underwater (down from 71 percent in the first quarter.)
Are you an under-fortysomething with negative equity in your home? What will it take to get you to sell?