Home Value Drop Leaves 27% of U.S. Mortgages Underwater

It's no secret that U.S. home values have begun broadly declining again since last summer. Online real estate marketplace Zillow provides some information today on how severe the effect has been. Home values fell 2.6% in the third quarter -- the most since the first quarter of 2009, when the home buyer credit was put into place. Since it expired last spring, prices began to dip again. Declining home values are also putting more borrowers underwater.

How bad is it? According to Zillow:

Negative equity rose to 27 percent of all single-family homes with mortgages, from 23.2 percent in Q3. Accelerated home value declines and a temporary slowdown in foreclosures both caused negative equity rates to jump.

Think about what that means: more than one in four Americans with a mortgage are underwater. That's a pretty grim reality. Yet Zillow does mention that the slowdown in foreclosures was part of the cause, which means that some of the underwater borrowers were scheduled to lose their mortgage instead. In most cases, their foreclosure will take place this year a little late. This is hardly any consolation, but it does explain part of why the percentage of underwater homes grew more than it would have due to falling home prices alone.

Read the full press release and check out more stats at Zillow.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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