Despite increasing prices, nearly one-third of all Seattle-area homeowners with mortgages owe more than the value of their homes, according to a new survey by Seattle-based Zillow.
The local negative equity (“underwater”) percentage of 31.2 is greater than the national negative of 25.4 percent of all homeowners with a mortgage. Another 18.2 percent of homeowners with mortgages, while not technically underwater, likely do not have enough equity to afford to move, Zillow reported.
“Reaching positive equity, even barely, is an important milestone,” said Stan Humphries, Zillow’s chief economist. “But things like real estate agents’ fees and a down payment for the next home traditionally come out of the proceeds from the prior home’s sale. Without enough equity, these costs will instead have to come out of a homeowner’s pocket, leaving many still stuck.”
Slightly more than 13 million homeowners with a mortgage were underwater at the end of the first quarter. When including homeowners with less than 20 percent home equity, the “effective” negative equity rate at the end of the first quarter was 43.6 percent, or a total of 22.3 million homeowners.
These homeowners likely cannot afford a down payment for a new home, tying them to their current homes and contributing to inventory shortages.
A homeowner technically reaches positive equity as soon as the market value of their home exceeds their outstanding loan balance. But listing a home for sale and buying a new one generally requires equity of 20 percent or more to comfortably meet related costs.