A decade after U.S. home sales peaked, 15.4 percent of owners in the first quarter owed more on their mortgages than their properties were worth, according to a report Friday by Zillow Inc.
The news wasn’t quite so bad in Denver, which ranked fourth best among the 35 largest housing markets.
In Denver, 35,336 homes, or 6.7 percent, were underwater, according to the report. Of those, 41.2 percent of homeowners owed up to 120 percent of their home’s value and 58.8 percent owed more than 120 percent.
The only cities among the largest housing markets with a lower negative equity rate were San Jose, Calif., at 3.8 percent; San Francisco at 6.1 percent, and Houston at 6.5 percent.
The U.S. average is down from a high of 31.4 percent in 2012, but it’s still alarmingly above the 1 percent or 2 percent that marks a healthy market, said Stan Humphries, chief economist at the Seattle-based real-estate data provider.
“There’s a large swath of the housing market which could become quite static, which creates real long-term problems,” Humphries said.
The share of mortgage borrowers underwater in the first quarter was down 3.4 percentage points from 18.8 percent at the same time last year, according to the Zillow data. That’s a marked slowdown in the pace of improvement from the 6.6 point drop in the 12 months through March 2014.
The scars aren’t lost on policy makers. Federal Reserve Chair Janet Yellen, in a May 22 speech in Rhode Island, put underwater properties first in listing “a number of economic headwinds that have slowed the recovery.”
“Negative equity doesn’t get discussed as much because we don’t see people getting thrown out of their homes by sheriffs and foreclosure auctions anymore, or as much,” Humphries said. “That’ll be heating up again as a topic. It’s not getting better.”
Bloomberg News contributed to this report.
