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Report: 135,000 Valley 'underwater' homeowners can breathe

PHOENIX -- A report released Wednesday indicates that over 135,000 Valley homeowners will not have to deal with negative equity.

According to the Phoenix Business Journal, Zillow Inc. revealed that the underwater rate dropped almost 31 percent last year in comparison to the prior year. Los Angeles, Calif., was the closest to the Phoenix with 73,000 homeowners no longer paying more than their home's estimated value.

Yet Zillow experts said Arizona's metropolitan area will continue to deal with underlying problems. Phoenix residents should expect the underwater rate to slowly decline at a 34.8 percent rate. Approximately a much lower figure of 43,000 homeowners should anticipate reaching above water by the end of the fiscal year.

However, Phoenix has nationally transitioned from the second-worst rank in negative equity to the eighth-worst.

The national negative equity average stands at 27.5 percent, Zillow said. That national average accounted for 13.8 million homeowners whose negative equity totalled a staggering $1 trillion-plus.

Zillow associates added that under 1 million homeowners will rise above the national underwater rate, which suggests the negative equity should drop to 25.5 percent before next year.

"As home values continue to rise and more homeowners are pulled out of negative equity in 2013, the positive effects on the housing market will be numerous. Freed from negative equity, homeowners will have more flexibility, and some will likely choose to list their home for sale, helping to ease inventory constraints and moderating sometimes dramatic, demand-driven price increases in some markets," Zillow Chief Economist Stan Humphries said in the report. "But negative equity is still very high, and millions of homeowners have a very long way to go to get back above water, even with current robust levels of home value appreciation in most areas. As a result, negative equity will remain a major factor in the market for the foreseeable future."

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