Underwater Homeowners Still Swimming

by: Wall Street Strategies

By David Silver

This morning, Zillow's (NASDAQ:Z) negative equity report was released, and it showed that the trends in housing continue to improve. In the third quarter of 2012, home values showed the biggest quarterly gain since 2006. National home values appreciated 1.3% from Q2 to Q3 2012, with much of that appreciation focused in hard-hit areas like Arizona, Florida and California.

However, the Fiscal Cliff and all the banter risk derailing the bounce in home prices. According to the third quarter Zillow Negative Equity Report, 28.2% of U.S. homeowners with a mortgage (roughly 14 million people) were underwater in the third quarter of 2012. Approximately one third of all homeowners do not have a mortgage and own their home free and clear.

In total, underwater homeowners owe $1.02 trillion more than their homes' worth. More than 42% of underwater homeowners (11.9% of all homeowners with a mortgage), owe 20% or less than their home is worth. On average, U.S. homeowners in negative equity owe $73,163 more than their house is worth, or 42.5% more.

While roughly a quarter of homeowners with a mortgage are underwater, 90.3% of these homeowners are current on their mortgage and continue to make payments. This stat shows that most of the people that couldn't afford their homes have already been foreclosed upon.

One of the biggest complaints about the housing initiatives that were instituted by the government was directed at the fact that people that were underwater but were making their payments should have been the first ones helped by HAMP and the other programs the government instituted to help bounce back from the crash in housing.

Click to enlarge