Number Of Homeowners Seriously Underwater On Their Mortgages Jumped In Q1

Posted by Patrick Barnard on April 23, 2015 No Comments
Categories : Mortgage Servicing

With home prices continuously rising, it's hard to imagine that the number of homeowners who are seriously underwater on their mortgages would increase.

But that's exactly what happened in the first quarter, when the share of seriously underwater homeowners increased 0.4 percentage points compared to the fourth quarter to reach 13.2% of all properties with a mortgage, RealtyTrac reports.

It was the first quarterly increase in the underwater rate since the second quarter of 2012, the firm reports.

Still, the number of homeowners who were underwater was down compared to the first quarter of 2014.

It should be noted that the number of borrowers who are underwater on their mortgages can vary greatly with just a slight change in the average home price.

According to the firm's U.S. Home Equity & Underwater Report, there were 7,341,922 properties seriously underwater as of the end of the first quarter.

RealtyTrac defines seriously underwater as where the combined loan amount secured by the property is at least 25% higher than the property's estimated market value.

‘At the end of 2014 we saw the lowest share of seriously underwater properties since we began tracking such data, but in the first quarter that share bumped up slightly as home price appreciation continued to slow down in many markets,’ says Daren Blomquist, vice president at RealtyTrac, in a statement. ‘In addition, the data indicates more owners who have regained equity listed and sold their homes in the first quarter, cashing out on some of the home equity on the table in the U.S. housing market. The biggest change in the equity landscape nationwide was in the category of homeowners with between 20 percent and 50 percent equity, which saw a net decrease of nearly half a million between the end of the fourth quarter and the end of the first quarter.

‘Meanwhile most of the seriously underwater homeowners are still stuck in their homes as short sales and other foreclosure alternatives lose momentum, tilting the national home equity scales back slightly toward a higher share of negative equity,’ Blomquist adds.

Markets with the highest percentage of seriously underwater properties in the first quarter were Lakeland, Fla., (28.7%); Las Vegas, Nev. (28.4%); Cleveland, Ohio (28.2%); Akron, Ohio (27.2%); Orlando, Fla. (26.1%); Tampa, Fla. (25%); Chicago, Ill. (24.7%); Palm Bay, Fla. (24.5%); and Jacksonville, Fla. (24.3%).

Perhaps not surprisingly, the report shows that the percentage of loans seriously underwater was higher for loans originated during the housing bubble years of 2004 to 2008.

In fact, 38% of all loans originated in 2006 were seriously underwater, the most of any loan vintage, followed by 2007 (33%), 2005 (30%), 2008 (23%) and 2004 (21%), the report shows.

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