SEATTLE-The national negative equity rate fell in the first quarter, to 25.4% of all homeowners with a mortgage, according to the first quarter Zillow Negative Equity Report. But another 18.2%, while not technically underwater, likely do not have enough equity to afford to move.
Slightly more than 13 million homeowners with a mortgage were in negative equity, or underwater, at the end of the first quarter, owing more on their mortgage than their home is worth. But when including homeowners with less than 20% home equity, the “effective” negative equity rate at the end of the first quarter was 43.6%, or a total of 22.3 million homeowners. These homeowners likely cannot afford a down payment for a new home, tying them to their current homes and contributing to inventory shortages.
A homeowner technically reaches positive equity as soon as the market value of their home exceeds their outstanding loan balance. But listing a home for sale and buying a new one generally requires equity of 20% or more to comfortably meet related costs.

“Reaching positive equity, even barely, is an important milestone. But things like real estate agents' fees and a down payment for the next home traditionally come out of the proceeds from the prior home's sale. Without enough equity, these costs will instead have to come out of a homeowner's pocket, leaving many still stuck,” said Zillow chief economist Stan Humphries. “Looking at the effective negative equity rate could explain why recent, healthy declines in the number of underwater borrowers haven't yet translated into more homes for sale. The only cure is patience, as rising home values continue to build equity to the point where more homeowners can realistically sell.”

Among the 30 largest metro areas covered by Zillow, those with the highest effective negative equity rate, including homeowners with 20 percent equity or less, include Las Vegas (71.5%); Atlanta (64.1 %); and Riverside, CA (59.7%).