Nearly 9 percent of Phoenix homeowners underwater, study shows
May 31, 2018, 4:45 AM | Updated: 9:35 pm
(AP Photo/Matt York)
(AP Photo/Matt York)
PHOENIX — The United States saw its negative equity rate fall below 10 percent for the first time since the housing market crash.
Of the 4.4 million homeowners still “underwater,” or who owe more than their home is worth, 61,917 (8.7 percent) reside in Phoenix.
But according to Zillow, Phoenix’s numbers aren’t as bad as they seem.
“Even though these numbers seem kind of shocking… they’re pretty middle of the road,” Zillow economist Sarah Mickhitarian said. “They’re average among the largest metros across the country and it’s significantly better than it was six to seven years ago.
“It might seem shocking that 26 percent of homeowners with a mortgage don’t have enough equity in their homes to cover the cost of selling and buying a new one, but in the grand scheme of things, I don’t think that should be an alarming statistic.”
Out of the 35 major cities polled, 13 had worse negative equity rates than Phoenix.
When looking at the number of underwater owners who owed at least twice what their home is worth, Phoenix came in at 14.8 percent.
But is there cause for concern?
“There’s only so many homes available on the market and that’s why we are seeing a growth in prices,” Mickhitarian said. “It’s not because of poor lending practices or anything that has previously caused a bubble.
“Home values have continued to grow at a pretty good pace, that’s true in the Phoenix metro area as well, and a lot of that growth is precipitated by demand.”
Low inventory is considered one of the main factors that is driving home prices up, as the demand from millennials — who represent the largest group of home buyers — exceeds the number of homes available. Negative equity plays a big part in this because underwater homeowners tend to hold onto their homes instead of selling them for a loss, according to Zillow.
Among the cities included in the report, San Jose came in with the lowest number of homes in negative equity at 5,168. It also had the lowest percentage of owners who owe 200 percent on their homes, 4.5 percent, and the lowest negative equity rate at 1.9 percent.
Chicago boasted the worst negative equity rate at 15.5 percent.
Looking to get out of negative equity? Save, save, save.
“Continue to try and save as much money as you can and continue to make those monthly mortgage payments so that eventually, especially as home values rise, it should be easier and easier to get out of negative equity because your home is worth more so the amount that you have left on your mortgage should eventually get smaller relative to the value of your home,” Mickhitarian said.
