The blog post also noted another positive trend. While the overall negative equity rate remains high, the depth of negative equity is declining. For instance, in Phoenix, the percentage of homeowners who owed more than double of what their homes were worth plummeted to 5.7% in the first quarter of 2013 from 14.8% a year earlier. In Las Vegas, nearly 16% of mortgagees owe more than double the value of their homes, but this is down sharply from 26.8% a year earlier.
The strong improvement in negative equity positions is very positive, as it lowers the likelihood of defaults. Historically, borrowers who are deeply underwater have shown a greater propensity to default on their mortgage loans. Mortgage loan performance is improving significantly, with LPS reporting that the percentage of homeowners late more than 30 days on their loan payments slipping to 6.2%, the lowest level since 2008.
91% of all underwater borrowers are current on their mortgage, with 9% defaulting. That means 2.3% of all homeowners with a mortgage remain at high risk for foreclosure in the near-term. Zillow forecasts the negative equity rate to fall to 23.5% by the first quarter of 2014, freeing up 1.4 million homeowners. -- Written by Shanthi Bharatwaj in New York. >Contact by Email. Follow @shavenk