More than 13 million homeowners were still underwater with their mortgages in the first quarter of 2013 – and about 9 million of them simply do not have enough equity to move, according to Zillow's Negative Equity Report.
Although the national negative equity rate fell to 25.4% in the first quarter, most homeowners who are underwater will be staying put for now.
It's even tough for those homeowners who have some equity built up: According to Zillow, about 18.2% of homeowners who are not underwater simply do not have the financial means to get out of their current situation.
It's especially tough for those who have 20% or less equity in their homes. According to Zillow, when these homeowners are included, the ‘effective’ negative equity rate at the end of the first quarter was 43.6%, or a total of 22.3 million homeowners.
‘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,’ said Dr. Stan Humphries, Zillow's chief economist, in a release. ‘The only cure is patience, as rising home values continue to build equity to the point where more homeowners can realistically sell.’
Interestingly, the trend is contributing to a shortage of available housing stock, which in turn is driving up home prices. As values increase, the situation is expected to improve.
As such, Zillow predicts the negative equity rate among all homeowners with a mortgage will fall to 23.5% by the first quarter of 2014.