As home values continue to rise, the national negative equity rate, commonly known as being "underwater," continued to fall in the second quarter, dropping to 23.8 percent of all homeowners with a mortgage, according to the second quarter Zillow Negative Equity Report. However, millions of homeowners remain so far underwater that it will take years for them to regain equity, even as home values continue their recovery.
Approximately 12.2 million homeowners with a mortgage were in negative equity, or underwater, at the end of the second quarter, owing more on their mortgages than their homes are worth. That is down from 13 million homeowners in the first quarter and 15.3 million at the same time last year. Roughly one-third of homes are owned without a mortgage. The negative equity rate among all homeowners, both with and without a mortgage, was 16.7 percent at the end of the second quarter.
Nationwide, more than half (57 percent) of homeowners in negative equity are underwater by 20 percent or more, and roughly one in seven (13.4 percent) owes more than twice what their home is worth. According to the most recent Zillow Home Value Forecast, home values are expected to rise 4.8 percent in the next year.
Assuming appreciation at that rate going forward, it would take a homeowner underwater by 20 percent roughly four years to reach positive equity.