Negative Equity Fell Below 20 Percent Threshold in Q4 2013, Zillow Says

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Negative Equity Fell Below 20 Percent Threshold in Q4 2013, Zillow SaysNew data from real estate service Zillow, Inc. (NASDAQ: Z) show that the national negative equity rate had dropped below the crucial 20 percent threshold in the December ending quarter of 2013, marking the first time in years that the metric fell under that mark.

According to the Zillow Negative Equity Report for quarter four 2013, only 9.8 million American homeowners are still “underwater,” or owing more on their home loans than the present value. The decline in the December 2013 frame marked the seventh straight quarter wherein negative equity has declined, while home values have gone up simultaneously, allowing for about 3.9 million less Americans to get out of their underwater state.

As of the December 2012 quarter, negative equity was at 27.5 percent nationwide, while this figure was at 21 percent in quarter three 2013, or the quarter ended September 2013.

Zillow chief economist Dr. Stanley (Stan) Humphries described the statistics as having reached “an important milestone,” one that has led in more inventory being freed up as the U.S. housing market continues to stabilize. “But a number of headwinds will prevent negative equity from falling at the kind of sustained, rapid pace we need before the market can completely return to normal, and it remains roughly four times what it is in a healthier market,” he added, noting that negative equity remains a serious problem. “High negative equity is just another sign of how distorted the market continues to be, and how far we still have to go on the road back to normal.”

For instance, close to 38 percent of all homeowners are “effectively” underwater, meaning that they cannot sell their homes for a decent profit that would cover for maintenance costs, such as those for listing their old home and purchasing new property.