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The number of people with mortgages who owe more than their homes are worth is dropping, according to latest Negative Equity Report from Zillow. The number of people with negative equity in the U.S. has dropped to just over 25% of all of those who hold mortgages and experts expect conditions to improve further, which means more sellers will be willing to enter the market. It’s estimated that about 18% more would still be underwater if they tried to sell, however, due to realtor’s fees and down payments for the next home, but the improvement is helping to further stimulate the housing recovery. For more on this continue reading the following article from Property Wire.

Rising home values in the United States have resulted in the national negative equity rate falling in the first quarter of 2013 to 25.4% of all home owners with a mortgage, new figures shows.

The first quarter Zillow Negative Equity Report also shows that another 18.2% of home owners with mortgages, while not technically underwater, are unlikely to have enough equity to afford to move.

But experts say that it is only a matter of time before the situation improves further as rising home values are continuing to build equity to the point where more home owners can realistically sell.

Overall slightly more than 13 million home owners with a mortgage were in negative equity, or underwater, at the end of the first quarter, owing more on their mortgage than their home is worth. But when including homeowners with less than 20% home equity, the ‘effective’ negative equity rate at the end of the first quarter was 43.6%, or a total of 22.3 million home owners.

Zillow said that these home owners are unlikely to be able to afford a down payment for a new home, tying them to their current homes and contributing to inventory shortages.

A home owner technically reaches positive equity as soon as the market value of their home exceeds their outstanding loan balance. But listing a home for sale and buying a new one generally requires equity of 20% or more to comfortably meet related costs.

‘Reaching positive equity, even barely, is an important milestone. But 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,’ said Zillow chief economist Stan Humphries.

‘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. The only cure is patience, as rising home values continue to build equity to the point where more homeowners can realistically sell,’ he explained.

Among the 30 largest metro areas covered by Zillow, those with the highest effective negative equity rate, including home owners with 20% equity or less, include Las Vegas at 71.5%, Atlanta at 64.1% and Riverside, California at 59.7%.

The first quarter Zillow Negative Equity Forecast predicts the negative equity rate among all home owners with a mortgage will fall to 23.5% by the first quarter of 2014, lifting more than 1.4 million additional homeowners nationwide into positive equity.

Of the 30 largest metro areas, the majority of these newly freed home owners are anticipated to come from Los Angeles with 94,642, Riverside with 74,693 and Phoenix with 51,580.

These results are from the first quarter edition of the Zillow Negative Equity Report, which looks at current outstanding loan amounts for individual owner occupied homes and compares them to those homes' current estimated values.

This article was republished with permission from Property Wire.