About 45 percent of homeowners in Maricopa and Pinal counties — or 352,444 homes — were underwater during the third quarter, a 13 percent-drop from the two previous quarters when slightly more than half were underwater, the report said.
Underwater, or negative equity, is when a homeowner owes more on their mortgage than their home’s present assessed value. Zillow calculates the negative equity rate as the percentage of all mortgaged homes in an area that are underwater.
One of the highest negative equity rates in the Valley was in the south Phoenix ZIP code of 85043, where 74 percent of homeowners were underwater in the third quarter; about 40 percent of those homeowners were underwater by a whopping 200 percent.
While that’s significantly higher than the Valleywide average, it’s still a notable decline from when the area posted a 81 percent negative equity rate in the second quarter, the report said.
Metro Phoenix’s underwater rate during the third quarter was fifth-highest in the nation, based on Zillow’s analysis of the top 30 largest metropolitan areas.
The highest negative equity in that time frame was Las Vegas’s staggering 63 percent, down from 68.5 percent in the previous quarter.
Atlanta trailed behind in second place with 50.4 percent of mortgaged homes underwater, versus last quarter’s 54.4 percent, and was followed by Orlando’s 47.7 percent, down from 51.9 percent, and Riverside, Calif.’s 47.3 percent, down from 51.2 percent.
Despite the quarter-over-quarter improvements, the aforementioned metro areas, including Phoenix, are far worse off than the rest of the nation, the report said.
The nationwide negative equity rate for the third quarter was 28.2 percent, or slightly more than 14 million underwater homeowners. That’s down from the previous quarter’s 31 percent negative equity, or 15.3 million homeowners, the report said.
Zillow officials attributed the negative equity decline to an increase in mortgage refinances and rising home values in recent months, but cautioned there are still hurdles to overcome.
“While we’re moving in the right direction, a substantial number of homes are still locked up in negative equity, unable to enter the existing re-sale market despite the desires of their owner,” Stan Humphries, Zillow’s chief economist, said in the report. “The housing market has found real momentum of its own, but is not immune from shocks to the broader economy. If negotiations centered on resolving the fiscal cliff don’t inspire confidence in investors and consumers alike, recent home value gains – and, as a result, falling negative equity rates – could stall.”