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:


Virginia Beach, VA 16.7%
Chicago, IL 15.5%
Baltimore, MD 14.2%
Cleveland, OH 13.0%
St. Louis, MO 12.0%
Philadelphia, PA 11.6%
Washington, DC 11.3%
Detroit, MI 10.8%
Las Vegas, NV 9.9%
Atlanta, GA 9.9%

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.