In 2008, when the housing market crashed, over 30% of homeowners were upside-down on mortgages. Fast-forward 10 years, and the housing market has made significant progress in its recovery. The national percentage of homeowners who are upside-down has fallen below 10%, according to a recent report from Zillow. This is the lowest it has been since the crash occurred, which is great news for those who have been struggling to free themselves from negative equity. However, there are still certain housing markets across the United States with a large number of upside-down homeowners.?

What does it mean to be upside-down?

When a homeowner is ?upside-down? (or ?underwater?) on their mortgage, they have negative equity. This means that they owe more money for their mortgage than the actual value of their house. To illustrate, let?s say the value of your home fell from $90,000 to $65,000 and the mortgage on your home is $75,000. You would now owe more money to pay off your mortgage than the amount of money you could make selling it.

How does this happen?

Any mild or severe recession can cause homeowners to turn upside-down. However, the housing market crisis of 2008 is largely to blame since it caused most homes to lose more than a quarter of their value. This resulted in millions of homeowners sinking into negative equity. Today, national home values are continuing to increase, saving many people who have been suffering from negative equity.

What markets have the highest percentage of upside-down homeowners?

Market Location:? ? ? ?Negative Equity Rate:

Despite the positive progress made, roughly 4.5 million homeowners in the United States are still upside-down on their mortgages. With a negative equity rate of 16.7%, Virginia Beach takes the crown for having the most upside-down homes in America. Falling only shortly behind is Chicago, with a negative equity rate of 15.5%.
Rather than selling their home for a loss, Americans in the above housing markets are instead holding onto their homes for as long as possible. ?Their struggles mean there are fewer homes on the market for homebuyers today,? says Aaron Terrazas, the senior economist at Zillow. ?In corners of the country where home values have been stagnant in recent years, recent homebuyers can easily fall underwater, particularly those who buy with small down payments.?

Looking Ahead

Upside-down homeowners need to be patient if they wish to obtain positive equity.
Despite the high percentage of negative equity in select housing markets, we have seen significant progress made to lower the national average. Hopefully, this number will continue to decline, and struggling homeowners can break-free from the chains of having negative equity.

Fixed Rate 30-Year Mortgages Accounted for More than Half of U.S. Home Loans Last Year
Fixed rate 30-year mortgages accounted for 52.8% of all mortgages last year, a 5% higher percentage than in 2016. This is based on results from the annual Residential Real Estate Survey Report released recently by the American Bankers Association (ABA).
More than 150 banks participated in the survey this February and March by providing data, primarily about their mortgage lending activities last year.
What?s the Breakdown by Loan Type?
While the longer-term fixed rate mortgages made up a larger percent of all home loans in 2017 than in 2016, the percentage of fixed rate 15-year loans were down. They accounted for 15.4% of all mortgage loans in 2017, compared to 18.6% in 2016.
Other types of fixed rate mortgages accounted for 11.8% of home loans in 2017. Next were one-year adjustable rate mortgages (ARMs), which accounted for 7.7% of mortgage loans last year, followed by interest-only ARMs, 5.9%; 7/1 ARMs, 4.4%; 5/1 ARMs, 1.4%; and 3/1 ARMs, 0.6%,
More First-Time Home Buyers Reported
The percentage of single-family mortgage loans that were for first-time home buyers also reached a record high of 17% in 2017. This percentage has been on the rise for several years now, increasing by 1% every year since 2014.
Predictably the percentage of purchase loans was also up compared to refinance loans. In 2017, for example, 60% of family mortgage loans were for purchases, compared to 45% in 2015 and 53% in 2016.
Regulatory Change Has Hugely Impacted Mortgage Lenders
One thing that was clear in reviewing the ABA report is that U.S. banks have been greatly impacted by recent regulatory reforms. About 96% said they?ve had ?higher mortgage-specific compliance costs? due to regulatory changes, while 97% reported higher consulting costs.
In addition, 74% said they?d had to hire more staff to keep up with the changes, with 69% saying they?d added one-two new staff members. Another 23% had added three-five positions, 4% had added five-10, and another 4% had added more than 10.
We Hope You?ve Enjoyed this Information on Mortgages
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