Negative equity–what you have when you owe more on your home loan than the property is worth–is one of the defining features of the still-unfolding mortgage crisis. It’s a particularly nasty problem because it can lead to all sorts of unpleasant outcomes for the real estate market and the economy as a whole.

Having negative equity, which is also known as being “underwater” on a mortgage, makes homeowners more likely to end up in foreclosure. It restricts a borrower’s ability to refinance or buy another home, which in turn stifles demand for housing. It even reduces the flexibility of the labor market, since underwater homeowners are less willing to leave town to take a different job, says Stan Humphries, the chief economist at Zillow.

“We have never had negative equity like this at the national level in as many different regions as we have now,” Humphries says.

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