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Report: Positive Outlook for Homeowners Planning to Sell

Zillow • Aug 27, 2014 at 3:13 PM

By S.E. Slack

Real estate firm Zillow predicts that the negative equity rate among all homeowners with a mortgage will fall to at least 17 percent by the first quarter of 2015. That’s good news for homeowners hoping to relocate to a city with say, friendlier pedestrian commutes within the next year.

Because most homeowners are required to place 20 percent down when purchasing a home, home mortgages higher than 80 percent of the home’s value place many homeowners in a negative equity position.

Negative equity rates impact 36.9 percent of homeowners with a mortgage. Although not all of these homeowners are underwater (have a home value far less than the amount owed on the home), they have relatively little equity in their homes. That makes selling and buying a new home while covering all of the associated costs (real estate agent fees, closing costs and a new down payment) difficult.

The outlook is improving as the year moves on. Currently, the national negative equity rate is 18.8 percent, a drop of nearly 13 percentage points from a 31 percent peak in the first quarter of 2012.

Svenja Gudell, director of economic research at Zillow, says that during the first quarter of 2013, the national negative equity rate fell from 25.4 percent and dropped to 19.4 percent during the fourth quarter. As that happened, annual home value growth slowed to 6.6 percent at the end of the fourth quarter of 2013. By the end of the first quarter of 2014, that growth slowed even further to 5.7 percent.

More than 9.7 million homeowners with a mortgage still remain underwater.

In Ohio, Cincinnati is home to the highest number of homeowners – 87 percent – who are easily able to sell. Columbus comes in second with slightly better with 86 percent of homeowners in a positive position for sale.

Cleveland homeowners have the highest rates of negative equity with a surprising 25 percent of homeowners upside down in their homes. Of all homeowners nationwide – roughly one-third of homeowners do not have a mortgage and own their homes free and clear – 13.2 percent are underwater.

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