Many Twin Cities area homeowners owe more than their homes' value.
About 40 percent of those who own a home in the Twin Cities owe more than their house is worth, but most are making their mortgage payments on time.
That's according to a survey from Zillow.com, which said nearly one-third of all homeowners nationwide were underwater during the first quarter. Zillow said the total value of that negative equity was about $1.2 trillion.
The report paints a dismal picture of the housing market even as other indicators show signs of improvement. Home sales have increased by double digits in some areas, and the median sale price of those deals is up slightly, too. But with foreclosures surging through the market, there's still lots of downward pressure on prices. Consequently, it will be years before many homeowners, especially those who bought at the market peak or borrowed against the equity in their home, will be able to sell the house for what they owe.
High negative equity numbers are also why the inventory of homes for sale is low. Many who would like to sell simply can't because they are underwater.
Chris Willette, a short-sale expert with Edina Realty, said he's not surprised by the numbers.
"I think a lot of homeowners are really waiting for the market to start appreciating; that's why they have stayed current on their homes," he said. "However, with short sales and foreclosures taking over the traditional market, their hope deteriorates, they realize there's no way to catch up and have their home be worth something again."
In the Twin Cities, only 5.2 percent of those underwater homeowners were more than 90 days late compared with 10 percent nationwide.
Willette said that's a reflection of how reluctant many homeowners are to stop making mortgage payments even if there's little hope of ever recouping their equity.
"A large percentage have never been late on anything," he said.
The Zillow report said the number of homeowners underwater is particularly high in Isanti County, where it's about 50 percent. The county is about 35 miles north of downtown Minneapolis.
Wendy McClure, a sales agent with ReMax Results who has worked in the Isanti market, agrees that the construction boom helped contribute to the high number of homeowners who are underwater in the county, but she doubts that the share of homeowners underwater in the county is as high as Zillow's estimates.
"Zillow is a wonderful site and full of information," she said. "But much of the information that I have seen is not accurate."
She estimates that about half as many are underwater.
Jim Buchta • 612-673-7376