How are millions still underwater as home prices rise?

Mike Kemp | Getty Images
Mike Kemp | Getty Images

By Diana Olick | CNBC

Fast-rising home prices brought 1.5 million borrowers up from underwater on their mortgages in 2015, but there are still twice as many drowning. In total, 3.2 million homeowners nationally still owe more on their mortgages than their homes are currently worth, according to a new count by Black Knight Financial Services.

That brings the average negative equity rate to 6.5 percent, a vast improvement from the worst of the housing crash, but still well above historical norms. More concerning is that negative equity is now concentrated at the bottom price tier of the market. More than 16 percent of borrowers in these homes are underwater, which means they are frozen in place, unable to sell without losing money; these are the homes the market needs most, in order for young renters to become homeowners.

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