Almost 2 million American homeowners were freed from negative equity in 2012, and the overall percentage of all homeowners with a mortgage in negative equity fell to 27.5 percent at the end of the fourth quarter, according to Zillow.
The falling negative equity rate is good news for struggling homeowners and is largely attributable to a 5.9 percent bump in home values nationwide last year to a median Zillow Home Value of $157,400. At the end of 2011, 31.1 percent of homeowners with a mortgage were underwater, or more than 15.7 million people.
Among the nation’s 30 largest metro areas, those with the highest number of homeowners freed from negative equity last year were Phoenix (135,099), Los Angeles (72,936), Miami-Fort Lauderdale (70,484), Dallas-Fort Worth (59,461) and Riverside, CA (58,417).

Zillow predicts the negative equity rate among all homeowners with a mortgage will fall to at least 25.5 percent by the fourth quarter of 2013, freeing more than one million additional homeowners nationwide. Of the 30 largest metro areas, the majority of these newly freed homeowners are anticipated to come from Los Angeles (72,696) Riverside (62,407) Phoenix (43,044) Sacramento (33,356) and Dallas-Fort Worth (31,434).

 “As home values continue to rise and more homeowners are pulled out of negative equity in 2013, the positive effects on the housing market will be numerous. Freed from negative equity, homeowners will have more flexibility, and some will likely choose to list their home for sale, helping to ease inventory constraints and moderating sometimes dramatic, demand-driven price increases in some markets,” said Zillow Chief Economist Dr. Stan Humphries.

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