Only 27.5 percent of mortgage homeowners suffered negative equity in the fourth quarter 2012, compared to 31.1 percent a year earlier.
Zillow’s Negative Equity Report says nearly 2 million American homeowners were freed from negative equity in 2012.
Some 13.8 million homeowners with a mortgage were “underwater” suffering negative equity at the end of the fourth quarter, down from 15.7 million a year earlier.
Those who suffer negative equity owe more on their mortgages than their homes are worth.
Rising home values helped buoy homeowners above water. In 2012, national home values rose 5.9 percent year-over-year to a median value of $157,400, according to the Zillow Home Value Index (ZHVI).
2012 home equity gains
Among the nation’s 30 largest metro areas, those with the highest number of homeowners freed from negative equity in 2012, were Phoenix (135,099); Los Angeles (72,936); Miami-Fort Lauderdale (70,484); Dallas-Fort Worth (59,461); and Riverside, CA (58,417).
New this quarter, the Zillow Negative Equity Forecast predicts the negative equity rate among all homeowners with a mortgage will fall to at least 25.5 percent by the fourth quarter of 2013, freeing more than 999,000 additional homeowners nationwide.
2013 home equity gains
Of the 30 largest metro areas, the majority of these newly freed homeowners are anticipated to come from: Los Angeles (72,696 homeowners freed in 2013); Riverside (62,407 homeowners to be freed); Phoenix (43,044 ); Sacramento (33,356); and Dallas-Fort Worth (31,434).
“As home values continue to rise and more homeowners are pulled out of negative equity in 2013, the positive effects on the housing market will be numerous. Freed from negative equity, homeowners will have more flexibility, and some will likely choose to list their home for sale, helping to ease inventory constraints and moderating sometimes dramatic, demand-driven price increases in some markets,” said Zillow Chief Economist Dr. Stan Humphries.
“But negative equity is still very high, and millions of homeowners have a very long way to go to get back above water, even with current robust levels of home value appreciation in most areas. As a result, negative equity will remain a major factor in the market for the foreseeable future,” Humphries said.