CoreLogic: Number Of Homes With Negative Equity Rose 3.3% In Q4

Posted by Patrick Barnard on March 17, 2015 No Comments
Categories : Mortgage Servicing

About 1.2 million U.S. homes returned to positive equity at the end of the fourth quarter, bringing the total number of homes with positive equity to approximately 44.5 million, or 89% of all homes with a mortgage, according to CoreLogic.

However, about 5.4 million properties, or 10.8% of all properties with a mortgage, were still in negative equity, or ‘underwater,’ as of the fourth quarter, the firm finds. This is an increase of 3.3% compared to the 5.2 million homes, or 10.4% of all homes with a mortgage, that had negative equity in the third quarter. But it is down 18.9% compared to the 6.6 million homes, or 13.4% of all homes with a mortgage, that were underwater in the fourth quarter of 2013.

As of the end of the fourth quarter, the national aggregate value of negative equity was about $349 billion. That's up from about $341.8 billion in the third quarter – but down 13.4% from about $403 billion in the fourth quarter of 2013.

Of the 49.9 million residential properties with a mortgage, approximately 10 million, or 20%, have less than 20% equity (referred to as ‘under-equitied’) and 1.4 million of those have less than 5% equity (referred to as near-negative equity).

The big question, of course, is what will happen to home values over the next year: If they fall a little, more homes will be underwater; however, if they rise, fewer homes will be underwater.

The slight increase in the overall number of underwater homes in the fourth quarter compared to the third quarter was primarily due to declining home values in certain markets.

‘The share of homeowners that had negative equity increased slightly in the fourth quarter of 2014, reflecting the typical weakness in home values during the final quarter of the year,’ explains Frank Nothaft, chief economist for CoreLogic, in a statement. ‘[CoreLogic's home price index] dipped 0.7 percent from September to December, and the percent of owners 'underwater' increased to 10.8 percent. However, from December-to-December, the CoreLogic index was up 4.8 percent, and the negative equity share fell by 2.6 percentage points.’

‘Negative equity continued to be a serious issue for the housing market and the U.S. economy at the end of 2014 with 5.4 million homeowners still 'underwater',’ adds Anand Nallathambi, president and CEO of CoreLogic. ‘We expect the situation to improve over the course of 2015. We project that the [home price index] will rise 5 percent in 2015, which will lift about 1 million homeowners out of negative equity.’

States that had the highest percentage of mortgaged properties in negative equity in the fourth quarter were Nevada (24.2%); Florida (23.2%); Arizona (18.7%); Illinois (16.2%) and Rhode Island (15.8%). These top five states combined account for 31.7% of negative equity in the U.S.

States that had the highest percentage of mortgaged residential properties in an equity position included Texas (97.4%), Alaska (97.2%), Montana (97.0%), Hawaii (96.3%) and North Dakota (96.2%).

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