Negative Equity in the Sixth Federal Reserve District

  • Affordable Housing and Neighborhoods
  • Neighborhoods and Place
Elora Raymond
Federal Reserve Bank of Atlanta
Research Department
Discussion Paper 2016-1
March 2016

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Using Zillow's zip code level Negative Equity Report for the second quarter of 2014 and 2015, I map, describe, and analyze the characteristics of neighborhoods that have persistent negative equity in the Sixth Federal Reserve District, comprised of Alabama, Florida, and Georgia, and parts of Louisiana, Mississippi, and Tennessee. Persistent negative equity, when a house is worth less than outstanding mortgage debt, is high in the Sixth District and concentrated in urban areas. In a series of regressions, I evaluate the correlation of income, commute times, unemployment, housing stock quality, vacancy rates, mortgage market factors, and racial/ethnic composition on rates of negative equity. I also provide within-state and within-metropolitan estimates to understand the differences between the highest negative equity and moderate negative equity areas. I find that even after controlling for the housing market crash, the places with persistent high negative equity are in predominantly black zip codes with longer commute times, higher unemployment rates, and high rental vacancy rates. Economic indicators, housing stock quality, and measures of the local severity of the subprime and foreclosure crises are significant predictors of overall negative equity, but their inclusion as controls does not eliminate the strong association between racial composition and persistent negative equity. This research does not identify the causes of this pattern, but suggests that the housing market recovery is uneven and proceeding in a way that could widen the racial gap in housing wealth. Future research could investigate further the impact of transportation access, maintenance of vacant rental housing in hard-hit areas, and unemployment in areas with persistent negative equity.

JEL Classification: R31

Key words: negative equity, race, mortgages, Southeast


The author would like to acknowledge Dan Immergluck, a professor in the School of City and Regional Planning at Georgia Institute of Technology and a visiting scholar at the Federal Reserve Bank of Atlanta; Carolina Reid, assistant professor in the Department of City and Regional Planning at the University of California Berkeley; Karen Leone De Nie, assistant vice president of community and economic development at the Atlanta Fed; Jessica Dill, economic policy analyst in the Atlanta Fed's Center for Real Estate Analytics; Carl Hudson, director of the Atlanta Fed's Center for Real Estate Analytics; and Chris Cunningham, Atlanta Fed research economist and assistant policy adviser for thoughtful comments and review of this work during drafts. The views expressed here are the author's and do not necessarily reflect those of the Federal Reserve Bank of Atlanta or the Federal Reserve System; all errors are the author's.

Comments to the author are welcome at elora.raymond@atl.frb.org.