Half of mortgage borrowers under 40 are underwater

Rising home prices helped nearly one million homeowners emerge from being underwater on their mortgages during the second quarter. But younger homeowners are still struggling to stay afloat, according to report from Zillow.

The percentage of borrowers who owed more on their homes than they were worth fell to 30.9% during the second quarter, down from 31.4% three months earlier, according to Zillow. Of the 15 million borrowers who were underwater during the quarter, a disproportionately large number are under the age of 40, said Zillow chief economist, Stan Humphries.

Nearly half, or 48%, of all mortgage borrowers under age 40 are underwater, about twice the rate of borrowers who are older. And that has created a sort of gridlock that could hinder the housing market's recovery, he said.

"We hear about tight inventory in many markets, and it's clear where this is coming from," he said. "Negative equity is trapping young people in their homes, preventing them from selling. These homes are like the very starter homes potential first-time homebuyers are seeking." Read more >>