As the Housing Market Recovers, Negative Equity Concentrates in the Rust Belt
When the housing bubble burst, the West Coast had a disproportionate share of underwater homeowners
- Nationally, 12.7 percent of homeowners with a mortgage owed more than their homes were worth in Q1 2016, down from a high of 31.4 percent in Q1 2012.
- Chicago displaced Las Vegas as the large housing market with the highest rate of negative equity, with 20.3 percent of homeowners underwater.
- The Bay Area has the lowest rates of negative equity among large markets. San Jose and San Francisco are the only two large metros with negative equity rates below 5 percent.
SEATTLE, June 8, 2016 /PRNewswire/ -- As the housing market continues to recover, homeowners who are underwater on their mortgages are increasingly concentrated in the Rust Belt, while West Coast homeowners are less likely to be in negative equity, according to the first quarter Zillow® Negative Equity Reporti.
Nationally, 12.7 percent of homeowners with a mortgage were in negative equity, meaning they owed more on their mortgage than their homes were worth. U.S. negative equity is down from a peak level of 31.4 percent in the first quarter of 2012.
For years, Las Vegas has been the prime example of the housing bubble and bust, with nearly three-quarters of mortgaged homeowners underwater when the market bottomed out in in the first quarter of 2012. But Chicago now has the highest negative equity rate among large U.S. markets, surpassing Las Vegas in the first quarter of 2016. At its worst, Chicago had a 41.1 percent rate of negative equity, but its recovery has been sluggish and the negative equity rate has declined more slowly than elsewhere.
As the housing market recovered, the distribution of underwater homeowners across the country has shifted. In the first quarter of 2012, the West Coast, Southeast, and Rust Belt regionsii had a disproportionately greater share of underwater homeowners. For example, the Southeast had 20.4 percent of homes with a mortgage, but 24.9 percent of homes in negative equity.
Four years later, the West Coast, home to hot markets like the Bay Area, Portland, and Seattle, has only 10.2 percent of homeowners with negative equity, but 15.2 percent of all mortgaged homeowners. The imbalance was worst in the Rust Belt region, which includes Wisconsin, Illinois, Indiana, Michigan and Ohio, and which had an unevenly large share of underwater homeowners.
"When the housing bubble burst, the West Coast had more than its fair share of underwater homeowners," said Zillow Chief Economist Dr. Svenja Gudell. "But the strong local economy and job markets have significantly helped these housing markets recover, and several are now more expensive than they were during the housing bubble. Other parts of the country didn't get those same benefits, and until market fundamentals improve, homeowners and buyers in these areas will be facing disproportionately higher levels of negative equity as they navigate the housing market."
Four of the 10 metros with the highest rates of negative equity are in the Rust Belt. Meanwhile, the West Coast is home to five of the 10 metros with the lowest levels of negative equity.
| Metropolitan Area |
2012 Q1 |
2015 Q4 |
2016 Q1 |
| United States |
31.4% |
13.1% |
12.7% |
| New York/Northern New Jersey |
21.3% |
11.4% |
11.3% |
| Los Angeles-Long Beach-Anaheim, CA |
30.0% |
6.9% |
6.6% |
| Chicago, IL |
41.1% |
20.5% |
20.3% |
| Dallas-Fort Worth, TX |
30.7% |
5.8% |
5.4% |
| Philadelphia, PA |
25.0% |
15.0% |
14.9% |
| Houston, TX |
30.2% |
6.6% |
6.7% |
| Washington, DC |
32.4% |
15.3% |
15.1% |
| Miami-Fort Lauderdale, FL |
46.4% |
13.7% |
13.1% |
| Atlanta, GA |
55.2% |
17.6% |
16.6% |
| Boston, MA |
22.0% |
7.1% |
7.0% |
| San Francisco, CA |
30.7% |
4.4% |
4.4% |
| Detroit, MI |
49.8% |
16.1% |
15.4% |
| Riverside, CA |
53.4% |
13.5% |
13.2% |
| Phoenix, AZ |
55.5% |
15.2% |
14.1% |
| Seattle, WA |
39.6% |
9.5% |
9.2% |
| Minneapolis-St Paul, MN |
39.9% |
10.5% |
9.8% |
| San Diego, CA |
35.6% |
7.9% |
7.5% |
| St. Louis, MO |
30.7% |
17.0% |
16.0% |
| Tampa, FL |
48.3% |
14.7% |
13.8% |
| Baltimore, MD |
31.4% |
17.4% |
17.2% |
| Denver, CO |
29.0% |
5.5% |
5.5% |
| Pittsburgh, PA |
16.7% |
9.6% |
9.5% |
| Portland, OR |
34.3% |
5.6% |
5.2% |
| Charlotte, NC |
36.6% |
10.7% |
10.2% |
| Sacramento, CA |
51.2% |
10.4% |
10.1% |
| San Antonio, TX |
20.7% |
11.0% |
11.5% |
| Orlando, FL |
53.9% |
15.4% |
14.8% |
| Cincinnati, OH |
31.5% |
13.7% |
13.3% |
| Cleveland, OH |
33.9% |
17.1% |
16.6% |
| Kansas City, MO |
36.7% |
16.4% |
15.5% |
| Las Vegas, NV |
71.0% |
20.9% |
20.2% |
| Columbus, OH |
34.2% |
11.7% |
11.2% |
| Indianapolis, IN |
28.8% |
14.6% |
14.9% |
| San Jose, CA |
22.7% |
2.8% |
2.8% |
| Austin, TX |
25.0% |
7.1% |
6.9% |
Zillow
Zillow® is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with the best local professionals who can help. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow's Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Zillow also sponsors the bi-annual Zillow Housing Confidence Index (ZHCI) which measures consumer confidence in local housing markets, both currently and over time. Launched in 2006, Zillow is owned and operated by Zillow Group (NASDAQ:Z and ZG), and headquartered in Seattle.
Zillow is a registered trademark of Zillow, Inc.
_____________________________
i The data in the Zillow Negative Equity Report incorporates mortgage data from TransUnion, a global leader in credit and information management, to calculate various statistics. The report includes, but is not limited to, negative equity, loan-to-value ratios, and delinquency rates. To calculate negative equity, the estimated value of a home is matched to all outstanding mortgage debt and lines of credit associated with the home, including home equity lines of credit and home equity loans. All personally identifying information ("PII") is removed from the data by TransUnion before delivery to Zillow. Overall, this report covers more than 870 metros, 2,400 counties, and 23,000 ZIP codes across the nation.
ii Using Census Division definitions, the West Coast is the Pacific division (AK, CA, HI, OR, WA), the Southeast is the South Atlantic division (DC, DE, FL, GA, MD, NC, SC, VA, WV), and the Rust Belt is the East North Central division (IL, IN, MI, OH, WI).
SOURCE Zillow
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