A staggering 23.2 percent of American homeowners with a mortgage were underwater in the third quarter, according to Zillow.
That means nearly a quarter of those with a mortgage owe more than their property is currently worth (no home equity), thanks in part to falling home prices and zero down mortgages. That combination is wreaking havoc on homeowners (and banks).
In Las Vegas, a whopping 80.2 percent of homeowners are underwater on their mortgages, followed by 68.4 percent in Phoenix and 64.2 percent in Orlando.
In all, 11 markets tracked by Zillow have negative equity shares above 50 percent.
Nationwide, the negative equity share rose from 22.5 percent in the second quarter, and is at its highest level since Zillow began tracking in 2009.
“The high percentage of homeowners in negative equity continues to be troubling, in that it represents a huge number of people who are not only more vulnerable to foreclosure, but who are essentially trapped in their current homes and are prevented from selling and buying a new home,” said Zillow Chief Economist Dr. Stan Humphries, in a statement.
“This has profound implications for future demand and will be a millstone around the neck of the housing market.”
During the third quarter, home values fell in 77 percent of the markets covered by the report, and in five of those (Los Angeles, San Diego, San Francisco, San Jose and Ventura), values started to fall again after five consecutive quarterly increases.
So much for a turnaround…
Related: Can I refinance with negative equity?