Nearly Half of Chicago’s Homeowners are Underwater

November 08, 2011

figure of a yellow person on top of a roof of an underwater house with sharks circlingIn real estate, negative equity occurs when more is owed on a mortgage than its home is worth. That homeowner is underwater.

During the third quarter of this year, practically one out of every two metro Chicago real estate owners were submerged.

According to the Zillow Home Value Index released Tuesday, 46.2 percent of all single-family homeowners in the metro Chicago area owed more on their mortgages than their homes were worth during this year’s third quarter.

That’s a 9 percent increase from the second quarter. It’s also well below the national average of 28.6 percent.

And when Chicago’s homeowners did sell their properties during the third quarter, 43.4 percent of them did so at a loss. Nationally, that number was 34.4 percent.

Now, we aren’t in the worst condition. Of the largest 25 metropolitan areas covered by Zillow, those with higher negative equity rates than Chicago include:

Click to see the 25 metro areas covered by Zillow.

*46.7 percent in Miami-Fort Lauderdale, Florida

*50.9 percent in Sacramento, California

*51.4 percent in Riverside, California

*56.5 in Tampa, Florida

*58.7 percent in Atlanta

*66.2 percent in Phoenix

Zillow’s report shows the national home price during the third quarter of this year was $171,500, a decline of 0.2 percent from the second quarter.

Chicago’s third-quarter average home value was $169,900, a drop of 1.1 percent from the previous quarter. Though that is on par with the national average, our area has suffered from a bigger drop in values.

The national average home value of $171,500 is a 4.4 percent decline from last year and is 28.8 percent off its change from when home value’s were at their peak.

Chicago’s average home value of $169,900 registers a 9 percent drop from last year and a 37.4 percent change from peak.

And we haven’t even bottomed out yet.

“Given the steady drumbeat of recent negative economic news, home values held up better than would be expected,” Humphries said. “We have been forecasting a housing bottom in 2012, at the earliest, and third quarter data further confirms this forecast.”

The Obama administration recently unveiled a plan to expand the Home Affordable Refinance Program (HARP) so that more homeowners could refinance their high mortgages to lower rates despite the drop in their home’s value.

More details on the HARP plan are expected to be announced on Nov. 14. Stay tuned.

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