Black Knight: Most Underwater Properties Are In The Lower Price Tier

Posted by Patrick Barnard on April 04, 2016 No Comments

Although the number of homeowners who are underwater on their mortgages continues to decrease nationwide, a higher percentage of those who remain underwater are in lower-priced homes, a new report from Black Knight Financial Services shows.

According to the mortgage software firm’s monthly Mortgage Monitor report, roughly 6.5% of all homeowners with a mortgage were underwater as of February. That’s down 31% compared with February 2015.

However, when looking at properties in the lowest price tier, about 16.2% with a mortgage were still underwater. Although the lowest price tier is improving, it’s happening at a much slower pace, the firm notes.

As of the end of 2015, there were still 3.2 million borrowers in negative equity positions, representing $126 billion in underwater first- and second-lien housing debt, Black Knight’s research finds.

The firm also notes that because home price appreciation has been so geographically spotty in recent years, the recovery is “imbalanced,” with some areas improving and others being left behind the recovery.

“Throughout 2015, the negative equity population in the U.S. decreased by over 30 percent, bringing another 1.5 million homeowners out from underwater on their mortgages,” says Ben Graboske, senior vice president for Black Knight Data and Analytics, in a release. “However, even after four years of improvement, the recovery has not reached all corners.

“When we looked at the population by home price levels, we found that over half of the nation’s underwater properties are in the lowest 20 percent of their respective markets,” he says. “That’s the highest share on record. In fact, while the national negative equity rate is now 6.5 percent, for homes in the lowest price tier, it’s over 16 percent. Furthermore, this group is seeing a slower recovery than the nation as a whole. At the current rate of improvement, it would take more than five years for the negative equity rate in this lowest price tier to reach 2005 levels – roughly two-and-a-half years longer than homes in the top 20 percent.”

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