Negative equity: Ten million households still ‘underwater’

Nearly 10 million U.S. households – or about 18 percent of homeowners with a mortgage – are underwater, meaning their home is worth less than their mortgage.

Home prices are rising, and the number of underwater home owners is declining, but some are still feeling stuck.

“Most move-up homeowners typically use their home equity to cover broker fees, closing costs, and a down payment for their next home,” The Wall Street Journal reported. “Without those funds, many homeowners can’t sell.”

Some housing analysts say that understanding negative equity is the key to understanding a lot of the distortions occurring in the housing market.

The picture has been gradually improving, however. While the number of underwater owners remains high, some reports show more owners regaining equity. About 4 million homes returned to positive equity in 2013, resulting in a total of 42.7 million homes with a mortgage that now have equity, according to a CoreLogic report.

“The plight of the underwater borrower has improved dramatically since negative equity peaked in December 2009 when more than 12 million mortgaged home owners were underwater,” said Mark Fleming, chief economist for CoreLogic. “Over the past four years, more than 5.5 million homeowners have regained equity, reducing their risk of foreclosure and unlocking pent-up supply in the housing market.”