Progress has been made on negative equity front, but troubling trends persist

In the Houston housing market, only 6.5 percent of mortgage holders remain underwater, but a majority of those holders will not reach positive equity for some time.

That was the sobering finding of latest Zillow Negative Equity Report, which analyzed the mortgage markets in the nation’s largest housing markets.

The graph below examines the negative equity rate in those housing markets:

At 6.5 percent, Houston boasts one of the lowest negative equity rates among large metro areas; even in areas such as Miami and Phoenix, which have seen more robust housing recoveries than Chicago, negative equity remains in the high double digits.

At the same time, though, our next graph shows that despite that low number, many underwater homeowners will not reach positive equity for some time:

That graph splits up underwater homeowners into two groups: the yellow bars represents homeowners who owe between 100 and 120 percent on their house; and the green bars represent homeowners who are severely underwater, those who owe more than 120 percent.

So, for homeowners in the green bars – 55.3 percent of underwater homeowners, here in Houston, and the majority in nearly every other market – home prices will have to appreciate another 20 percent (at least) until they can even break even on a sale. The majority of underwater homeowners remain very, very underwater.

We’ve written before about the underlying economic conditions that continue to hold back housing and the supply of homes, and the nation’s stubborn problem of negative equity is certainly one of those conditions.