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Three Out of 10 Metro Area Homeowners are Underwater

Published: Monday, June 2, 2014 2:26 p.m. CST

By Sally Deneen

About three out of 10 Chicagoland homeowners are grappling with underwater mortgages, meaning they owe more than their properties are worth, according to Zillow’s first quarter 2014 figures.

Some 28.1 percent of owner-occupied homes in Greater Chicago have negative equity, which is worse than the national average of 18.8 percent and slightly worse than Detroit's 26.5 percent rate, according to the report.

The local rate is worse than several other Midwestern metros including Minneapolis, Columbus and Indianapolis, each at 21 percent or less. Chicagoland's proportion of underwater homes also is more than double that of Pittsburgh and, farther east, Boston. In Boston, 11.5 percent of owner-occupied homes are underwater.

Locally, homeowners who find themselves underwater on average owe $82,456 more than their homes are worth. According to Zillow, the median home value – $178,800 – is down about 27 percent from the peak.

Zillow director of economic research Svenja Gudell suggests the problem won't vanish soon. "Negative equity will have an impact on the market for the foreseeable future," her report states, "as the rate of decline has slowed with slowing home value appreciation."

Nationally, people in less-expensive homes are worse off, according to the report. Among all homes with a mortgage, about one in three priced within the bottom third of home values were underwater, according to Zillow. People living in the priciest homes are doing best – just 10.7 percent of their homes have negative equity. Among homes valued in the middle third tier, 18.1 percent are underwater.

Nearly half of underwater homeowners nationally are underwater by up to 20 percent of their loan value, "and will soon cross over into positive equity territory," according to Zillow. While that sounds great, "they will still be effectively underwater," the report states. That's because "they will not gain enough of a profit in the sale of their current house to pay the expenses and down payment associated with buying a new home."

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