SEATTLE (12/22/14)--The number of U.S. homeowners with underwater mortgages--where the value of the mortgage is higher than the value of the home--has fallen by 40% since 2012, according to a recent report from the Seattle-based real estate website Zillow.
When the housing market crashed in 2008, more than 16 million homeowners watched their mortgages flip upside-down. But two years removed from the lowest point of the recession, nearly half of those underwater have pulled themselves out of negative equity, Zillow said.
"The market has made terrific strides since bottoming out in late 2011 and early 2012, with millions of underwater homeowners freed in just the past few years, and millions more set to surface in coming months and years," said Stan Humphries, Zillow chief economist.
Many homeowners have reversed their fortunes through the foreclosure process or short sales, Zillow said, while others have simply continued to make mortgage payments until property values improved.
Whatever the case, the housing market could receive a boost with millions more homeowners holding positive equity, as they will be more likely to sell.
Improvements in this area of the housing market have varied across the country, with those geographic areas hit hardest during the financial crisis experiencing the most relief.
In Atlanta, 55% of homeowners were underwater in 2012, compared with just 23% of homeowners in 2014. Phoenix reached 58% of homeowners with upside-down mortgages in 2011, and that number has fallen below 20%.