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April 2023 » thefivestar.com 79 J O U R N A L April 2023 remaining home equity." "Nevertheless, with 66,000 borrowers en- tering negative equity in Q4, the total number of underwater properties is now approaching levels seen at the end of 2021, which was the lowest since the Great Recession," Hepp said. "The new hot spots for equity declines are largely markets that have seen the most sig- nificant home price deceleration, including Boise, Idaho; the San Francisco Bay Area; cities in Utah; Phoenix; and Austin, Texas." Negative equity, also referred to as under- water or upside-down mortgages, applies to borrowers who owe more on their mortgages than their homes are currently worth. As of Q4 of 2022, the quarterly and annual changes in negative equity were: » Quarterly change: From Q3 of 2022 to Q4 of 2022, the total number of mortgaged homes in negative equity increased by 6%, to 1.2 million homes or 2.1% of all mortgaged properties. » Annual change: From Q4 of 2021 to Q4 of 2022, the total number of homes in negative equity declined by 2% to 1.2 million homes or 2.2% of all mortgaged properties. Because home equity is affected by home price changes, borrowers with equity posi- tions near (+/- 5%), the negative equity cutoff, are most likely to move out of or into negative equity as prices change, respectively. Looking at the Q4 2022 book of mortgages, if home prices increase by 5%, 145,000 homes would regain equity; if home prices decline by 5%, 215,000 properties would fall underwater. COMMENTARY: ZONING IS KEY TO IMPROVING AFFORDABILITY Z oning is one of the most contentious issues in many jurisdictions across the country, no matter how big or small, but one thing zoning officials should be considering is ways to address the ongoing affordability crisis in creative ways that bene- fit municipalities and their residents alike. This information comes by way of Zil- low's Home Price Expectations Survey which polled 117 highly placed housing market executives and economists in December 2022. Of those surveyed, zoning reform was an overwhelmingly popular answer to create more opportunities in existing and new neighborhoods in growing communities to effectively address affordability. In addition, encouraging local govern- ments to support and not deny affordable housing initiatives in zoning in the form of tax credits plays a big part in creating an image of opportunity for what some would call "low-income" housing. "It seems straightforward: We need to build more homes," said Dr. Skylar Olsen, Zillow's Chief Economist. "Changes through policies like modest densification will give us more 'at bats' to create density and help communities stay livable for everyone. With- out a huge injection of new homes in the near future, affordability will continue to be a challenge for many—especially for first-time home buyers." The affordability of housing is consid- ered by Zillow to be a defining feature of the current real estate market. Their latest data shows that monthly mortgage costs are just under $1,600 for an average home, given a 20% down payment. This number is 46% higher than in January 2022 and $754 higher than before the pandemic. According to a study from Up for Growth, one of the key drivers of unaffordability has been the chronic shortage of new housing con- struction—which to this day has not recovered from the Great Recession—resulting in a 3.79 million-unit gap in home production. "Restrictive and exclusionary zoning, artificial barriers, and NIMBY opposition have combined to create an unprecedented and persistent housing shortage," said Mike Kingsella, CEO of Up for Growth. "Failure to address these issues will create lower economic output and fewer opportunities for everyone. Families and individuals will be forced to pay higher rents, the equity gap will widen, and transportation costs will rise as people are forced to travel greater distances for work and education."