Zillow reported on Thursday that one of the persistent hangovers of the housing bubble and the recession that followed, namely negative residential equity, dropped in the third quarter of 2012 to 21 percent of all homeowners with a mortgage. More than 1.4 million American homeowners were freed from negative equity during the quarter.
The peak in negative residential equity was in 2012, when 31.4 percent of all homeowners with a mortgage found themselves in that predicament. Since the beginning of 2012, nearly 5 million homeowners have escaped this form of debt bondage, mainly because of recovering home prices in most markets.
So the situation is better, but still not terrific. Zillow also said that roughly 10.8 million U.S. homeowners with a mortgage remain underwater. Not only that, nearly 40 percent of homeowners with a mortgage are stuck with a loan-to-value ratio of more than 80 percent. In that situation, it’s difficult to afford the down payment on another home.