The housing crash has had a significant impact on local economies for years, leaving many homeowners with negative equity. If you’re unfamiliar with the term, negative equity is when a homeowner owes more on their home than the home’s market value. A new market report from reveals that 28.4 percent of homeowners in the United States were underwater on their house in the first quarter of this year. This is up from 27 percent in the fourth quarter of 2011.

If you’re underwater on your house but you aren’t planning to move then it is easy to just ride out the housing crisis. However, having a house that is worth less than you owe is problematic in certain situations.

For example, military families that are being reassigned may end up being accidental landlords if they don’t have the cash available to bring to closing. Families dealing with a job loss can’t sell a house and rent something cheaper if they are underwater, instead they will have to look at a short sale or face a foreclosure.

The inability to sell for at least what you owe is significantly higher than the national average in many markets. Zillow’s list of the 25 largest metropolitan areas shows five communities where more than half of single-family homes have negative equity, including:

  • Phoenix, Arizona – 68.4 percent
  • Tampa, Florida – 59.8 percent
  • Atlanta, Georgia – 55.7 percent
  • Sacramento, California – 51.2 percent
  • Riverside, California -50.7 percent
While these numbers are depressing, Zillow’s prediction that the bottom of the market will come in 2012 at the earliest is even more depressing.

According to Zillow’s Chief Economist Dr. Stan Humphries, “We did expect substantial payback from the homebuyer tax credits, which buoyed the housing market last year, but underlying demand post-tax credit, as well as rising foreclosures and high negative equity rates, make it almost certain that we won't see a bottom in home values until 2012 or later.”

For some, the American dream of owning a home is turning into an American nightmare.

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