About 22 million Americans may lack enough home equity to move, keeping property listings tight and limiting sales as the housing market recovers, Zillow Inc. (Z) said.
Forty-four percent of homeowners with mortgages owed more than their properties are worth or had less than 20 percent equity in the first quarter, the Seattle-based real estate data company said in a report today. Those people probably are locked in to their residences, because listing a house and purchasing a new one generally requires equity of at least 20 percent to meet costs such as a down payment and broker fees, Zillow said.
The people who cannot sell are contributing to a dearth of home inventory on the market, which is restraining deals in the key U.S. spring selling season. There were 2.16 million homes available last month, the fewest for any April since 2001, the National Association of Realtors reported yesterday. While the low supply is helping to fuel price gains and lift home equity, values have to climb further to ease the shortage, Zillow said.
“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,” Zillow Chief Economist Stan Humphries said in the report. “Things like real estate agents’ fees and a down payment for the next home traditionally come out of the proceeds from the prior home’s sale. Without enough equity, these costs will instead have to come out of a homeowner’s pocket, leaving many still stuck.”
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