Nearly a third of homeowners owe more than homes are worth: Zillow

Zillow's chief economist says American homeowners who are underwater on their mortgages actually are only running a "paper loss." (Rich Pedroncelli / AP Photo / May 24, 2012)

Nearly 16 million homeowners – not quite a third of people with mortgages – owe more on their home loans than their properties are worth, according to real estate site Zillow.

Of all homeowners in the U.S., 31.4% were underwater in the first three months of the year, up slightly from 31.1% in the fourth quarter of 2011.

For many, the situation was caused by a slump in their home values; for others, it was an increase in mortgage debt. High unemployment and economic instability could fuel more delinquencies and foreclosures.

But for many in the overturned boat, negative equity is what Zillow chief economist Stan Humphries calls a “paper loss.”

“As home values slowly increase and these homeowners continue to pay down their principal, they will surface again,” he said in a statement.

While 15% of underwater homeowners owe more than double what their property is worth, four in 10 owe 20% or less above the projected home value. And 90% are making their loan payments on time.

Collectively, Americans owe $1.2 trillion more than their homes are worth. Nevada has the highest percentage of such homeowners, with 67%, followed by Arizona with 52% and then Georgia, Florida and Michigan. In Los Angeles County, 32% of homeowners are underwater, compared with a quarter in Orange County and 53% in San Bernardino County.

Zillow has an interactive map here. Times real estate reporter Alejandro Lazo delves more deeply into the negative-equity issue here.

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