George S. May Business Blog

Zillow.com study finds that 20 million US homeowners are “underwater”

If you bought a house in the last couple years and put little or no money down, you probably aren’t in equity. Well, according to Zillow.com, you are not alone. According to the real estate data provider, 21.8 percent of US homeowners owe the bank more than their home is worth.

“A combination of falling prices and low down payments has left many borrowers underwater,” said Stan Humphries, Zillow’s vice president in charge of data and analytics. “In some markets, more than half of all homes are in negative equity.”

CNNMoney.com explains how Zillow coma to this conclusion:

“Zillow.com based its estimate of negative equity using its own home price estimates. It obtains these by collecting sales records and applying the price trends it finds to other homes in the community. It then compares its home price estimates to the initial loan balances to determine if borrowers have fallen underwater.

The analysis is based on the mortgage balance at the time of purchase and the price changes that have occurred since. It does not take into account that some homeowners may have paid down principal along the way.”

While there are definite nay-sayers, in reference to the study, as other estimates of negative equity from Moody’s Economy.com, for example, and CoreLogic, have not been that elevated, Humphries actually believes that the approach is on the conservative side. His reasoning is the trend has been for people to strip value from their homes in the form of home equity loans and lines of credit, than to add value by paying down their mortgages.

“I think our number is either right on or negative equity may be even a little worse,” he said.

Las Vegas led the number of homeowners with negative equity, at 67.2 percent. California, Nevada and Florida dominate the list of cities with the greatest number of homeowners with negative equity.

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