While we don't talk about it much these days, many U.S. homeowners are still severely underwater, owing more than the current value of their homes. Most of these properties are at the low end of the price spectrum, which limits the available inventory for first-time buyers.
This has the effect of keeping potential buyers out of the market even though they are able to take advantage of historically low mortgage rates.
According to Zillow, the millions of underwater homeowners who have resurfaced over the past year have led to a $75 billion decline in negative equity, which has helped keep the U.S. housing market jogging along steadily. But while the overall picture is vastly improved from even just a year or two ago, there are still 820,000 homeowners who owe more than twice as much on their mortgages as their homes are worth.