Company: 74K Arkansas homeowners are 'underwater'

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LITTLE ROCK, Ark. (AP) — About 74,000 Arkansas homeowners owed more on their mortgages than their homes were worth in the first three months of the year, according to a real estate research company Zillow.

That represents 16 percent of the estimated 465,000 homes in Arkansas with mortgages, the Arkansas Democrat-Gazette reported Sunday (http://bit.ly/1lgjcVx ).

Nationwide, nearly 10 million homeowners were underwater on their mortgages. That's about 19 percent of all mortgage holders, and that figure is down from 25 percent for the same period a year ago, Zillow reported.

Negative equity occurs when there is a decline in the value of a property, an increase in mortgage debt or a combination of both.

Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock, said low equity in a home makes it more difficult to sell and buy a new one.

"It locks you into your current mortgage. So that reduces mobility in the market," Pakko said. The negative-equity situation limits the inventory of houses for sale, creating a barrier to market improvement, Pakko said.

Zillow said it reached its estimates on negative equity in part by using mortgage data from credit information management company TransUnion. Zillow calculated negative equity by considering mortgage debt, home-equity lines of credit and home-equity loans.

The report covered more than 870 metropolitan areas and 2,400 counties nationwide, Seattle-based Zillow reported.

Recession house-price increases and declines were not as significant in Arkansas as in other parts of the country, Pakko said.

Northwest Arkansas saw some of the biggest drops in house prices in the state, Pakko said. In most cases, those declines were less than 10 percent.

Consequently, a good number of the state's underwater mortgages are in Northwest Arkansas, Pakko said.

Twenty-two percent of houses in Washington County had negative equity in the first quarter, Zillow said, as well as 20.5 percent in Benton County. That equals about 14,250 houses combined for both counties.

"But I suspect that Northwest Arkansas has also been improving the most because house prices are (increasing) there," Pakko said. "You'll see fewer homeowners in negative equity as house prices are improving."

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Information from: Arkansas Democrat-Gazette, http://www.arkansasonline.com

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