NEW YORK ( MainStreet) -- Too many homeowners are still underwater, despite a dramatic recovery in real estate prices since the lows of the recession.
Homes slip underwater, also known as reaching negative equity, when the mortgage exceeds the home's value. According to a Zillow report, 17% of homeowners with a mortgage, which amounts to a staggering 8.7 million homes, were underwater during second quarter.
The years leading up to the 2008 recession created the perfect storm for negative equity situations to flood the market. Interest only loans were all the rage, as consumers barely made down payments. But as long as home prices continued to inch higher, no one seemed to blink an eye after taking out such risky loans. That is, until the recession kicked in and home prices dropped precipitously.
Negative equity has become less of an issue as of late. The report says the number of homes underwater is down 23.8% year-over-year and 18.8% since first quarter.
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