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Zillow: Fiscal cliff may derail negative equity decline

For the first time since 2011, negative equity fell below 30%, which is also the largest quarter-over-quarter drop, according to the Zillow (Z) third quarter Negative Equity Report.

About 28% of homeowners have mortgages underwater, which is down 30.9% from the previous quarter.

The fall in negative equity is a result of home values rising 1.3% during the quarter compared to the last quarter, with a median value of $153,800.

The fall in negative equity rates will provide homeowners with additional options such refinancing or selling their home. The Obama Administration said in its October Housing Scorecard report rising home prices lifted more than 1.3 million underwater homeowners above water.

“But while we’re moving in the right direction, a substantial number of homes are still locked up in negative equity, unable to enter the existing re-sale market despite the desires of their owner,” said chief economist Stan Humphries of Zillow. The housing market has found real momentum of its own, but is not immune from shocks to the broader economy.

He added, “If negotiations centered on resolving the fiscal cliff don’t inspire confidence in investors and consumers alike, recent home value gains — and, as a result, falling negative equity rates — could stall.” 

The five metros experience the largest quarterly declines in negative equity including Phoenix, Las Vegas, Denver, Sacramento, Calif., and Orlando. 

cmlynski@housingwire.com

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