Kingsport-Bristol, Johnson City MSA negative equity rates up; national rate declines


Negative equityP

Data source: Zillow Negative Equity Report.

According to Zillow the national negative equity rate fell to 21 percent in Q3. That means about 10.8 million American homeowners owed more on their homes that they were worth.

While rates here were lower than the national rate, they posted small increased from Q2 and Q3 last year. The likely driver behind local increases is the area’s jobs situation. It has been contracting for most of the year.

The current Kingsport-Bristol rate is 15.2%. That’s 7,952 of the four-county MSA’s owner occupied households – 511 more than during Q2 and 132 more than Q3 last year.

In the Johnson City MSA the number of households with negative equity increased by 152 (15.8%) from Q2 and were 177 higher than Q3 last year.

The overall effect of negative equity on local housing markets is a factor in the long-term market health projections because it usually takes about 20 percent equity for a homeowner to list and comfortably meted related expenses to buy another home.

Market watchers are also mindful that the higher-than-average number of local homes without a mortgage gives the local negative equity situation a little more importance than it is on the national level.

According to the most current census reports, 46.7% (72,131) of the owner occupied households in the seven-county Johnson City-Kingsport-Bristol CSA don’t have a mortgage. The national percentage is 33.6%.

According to the most recent Zillow Home Value Forecast, home values are expected to rise 3.8% in the next year. Assuming appreciation at that rate going forward, it would take a homeowner underwater by 20% roughly five years to reach positive equity.

Local appreciation traditionally lags the national number a little so a back-of-the-envelope calculation puts the time frame closer to four years considering the local negative equity rates are about five points lower than the national number. Of course, they’ll need additional time to build toward that 20% sweet spot figure before they can comfortably sell and buy a new home. The traditional time frame between purchase and comfortable resale is seven year, but the new landscape has moved it closer to 10 years.

“We should feel good that we’re moving in the right direction and at a fast clip,” said Zillow Chief Economist Dr. Stan Humphries. “But negative equity will remain a factor for years to come, and must be considered part of the new normal in the housing market. Short sales will remain a persistent feature of the market as many homeowners remain too far underwater for reasonable price appreciation alone to help.”

The Zillow Negative Equity Report looks at current outstanding loan amounts for individual owner-occupied homes and compares them to those homes’ current estimated values. Loan data is provided by TransUnion, a global leader in credit and information management.


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