'Underwater' Homeowners Jump to 28 Percent in First Quarter

Published November 20, 2014

More than 28 percent of U.S. homeowners owed more than their properties were worth in the first quarter as values decreased by the biggest margin since 2008, Zillow Inc. announced.

"Underwater homeowners," or those with negative equity, increased from 22 percent a year earlier as home prices slumped 8.2 percent over the past 12 months, the Seattle-based real estate company said. About 27 percent of homes with mortgages were "underwater" in the fourth quarter, according to Zillow.

Home prices fell 3 percent in the first quarter and will drop as much as 9 percent this year as foreclosures spread and unemployment remains high, Zillow chief economist Stan Humphries said. Prices won't find a floor until 2012, he said.

"We get tired of telling such a grim story, but unfortunately this is the story that needs to be told," Humphries told Bloomberg. "Demand is still quite anemic due to unemployment and the fact that home values are still falling. And that tends to make people more cautious about buying."

The unemployment rate rose to 9 percent in April, up from 8.8 percent in March, the Department of Labor announced last week. Home prices, meanwhile, have fallen almost 30 percent from their June 2006 peak, wiping out more than $10 trillion in equity, including $667.5 billion in the first quarter, Humphries said.

Click here for more on this report from Zillow Inc.

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