CoreLogic: 5.1 Million U.S. Homes Still In Negative Equity

Posted by Patrick Barnard on January 12, 2015 No Comments
Categories : Residential Mortgage

About 273,000 U.S. homes returned to positive equity in the third quarter of 2014, bringing the total number of mortgaged residential properties with positive equity to approximately 44.6 million, or 90% of all mortgaged properties, according to CoreLogic.

About 5.1 million properties, or 10.3% of all homes with a mortgage, remained in negative equity, as of the third quarter. However, that is a dramatic improvement compared to the second quarter of 2014, when 5.4 million homes, or 10.9% of all homes with a mortgage, were underwater – and it is a huge gain compared to the third quarter of 2013, when 6.5 million homes, or 13.3% of all properties with a mortgage, were underwater.

Rising home prices played a major role in bringing properties back into positive equity. However, with home price appreciation now slowing, there is a question as to whether the 5.1 million homes still in negative equity will ever return to the black.

Borrower equity increased by approximately $800 billion, year over year, in the third quarter, CoreLogic reports.

The national aggregate value of negative equity was $338 billion at the end of the third quarter, down $10.2 billion from approximately $348.2 billion in the second quarter and down 16.2% compared to $403.2 billion in the third quarter of 2013, CoreLogic reports.

Of the 44.6 million residential properties with positive equity, approximately 9.4 million, or 19%, had less than 20% equity (referred to as ‘under-equitied’) and 1.3 million of those had less than 5% equity (referred to as near-negative equity).

‘Nationally, the negative equity share is down over three percentage points over the past year,’ says Sam Khater, deputy chief economist for CoreLogic, in a release. ‘Declines were concentrated in a handful of states, such as Nevada, Georgia, Michigan and Florida.

‘Forecasted house price appreciation of about five percent over the next year suggests that negative equity should be at about 8 percent a year from now – still above average – but approaching the pre-crisis level,’ he adds.

‘Negative equity continued to decrease in the third quarter, as did the level of homes mired in the foreclosure process,’ says Anand Nallathambi, president and CEO of CoreLogic. ‘This should hopefully translate into less friction in the housing market as we move forward. Better fundamentals supporting homeownership in the face of higher rents should attract more first-time home buyers to the market this year and next.’

States that had the highest percentage of mortgaged properties with negative equity in the third quarter of 2014 included Nevada (25.4%), Florida (23.8%), Arizona (19%), Rhode Island (14.8%) and Illinois (14.1%). These top five states together account for 33.1% of all negative equity in the U.S.

States that had the highest percentage of mortgaged properties with positive equity in the third quarter of 2014 included Texas (97.4%), Alaska (97.1%), Montana (97.1%), Hawaii (96.4%) and North Dakota (96.1%).

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