Sometimes, negative equity results in other outcomes. For Antionette Patricio and her family, the burden of paying off a loan that far outweighs her home value finally reached a breaking point. With nearly $300,000 in debt and two teenage daughters, she and her husband are trying to arrange a "short sale" in which they get out of the home without paying off the balance. The house might change hands for about $159,000, says Ms. Patricio, who works at a Zoots dry cleaners in Warwick, R.I. The lender would take a loss.
Patricio says she expects to become a renter to avoid the market swings. "If something goes wrong, it's not my problem," she explains.
Yet despite the head winds of underwater loans and high unemployment, the nation's housing situation appears to have turned a corner for the better.
The positive national trends include:
• Home prices. House values are rising or stabilizing – and this is occurring without the kind of special support that home-buyer tax credits offered back in 2010. A widely watched price index from the Federal Housing Finance Agency posted a gain of 3 percent in the second quarter, compared with a year earlier. The Standard & Poor's Case-Shiller indexes have recently improved to show month-over-month gains in all 20 major cities tracked.
The pattern also shows up on maps from Zillow.com, a company that follows local real estate markets. A year ago, the typical metro area was largely red, indicating still-falling prices. Now, the common color scheme includes prominent patches of green ZIP Codes, with positive year-over-year price changes.