RealtyTrac: 17.2% Of All U.S. Homes Seriously Underwater In Q2

Posted by Patrick Barnard on July 24, 2014 No Comments
Categories : Mortgage Servicing

About 9.1 million U.S. residential properties, or 17.2% of all homes with a mortgage, were seriously underwater – where the combined loan amount secured by the property is at least 25% higher than its estimated market value – in the second quarter, according to RealtyTrac.

And while that is a disconcerting number, it's down 26% from the second quarter of 2013. What's more, it is a slight improvement compared to the first quarter, when 17.4% of all homes with a mortgage were seriously underwater.

Still, the high number of homes that remain underwater is of concern, as home price appreciation has slowed considerably in most parts of the country. About another 8.8 million properties were on the verge of ‘resurfacing,’ or moving into positive equity, in the second quarter, according to the report. The question is whether home values will increase enough to bring these 8.8 million homeowners safely into positive equity.

About 66% of the homes in the foreclosure process in the second quarter were underwater (including those seriously underwater), while about 34% were in positive equity, according to the report. About 44% of all properties in the foreclosure process were seriously underwater – down from 45% in the first quarter of 2014 and down from 57% in the second quarter of 2013.

The number of homes with negative equity peaked in the second quarter of 2012, when 12.8 million residential properties – or 29% of all properties with a mortgage – were seriously underwater.

‘Home price appreciation has slowed in the last few months in many of the markets with the most underwater homes, slowing the pace at which homeowners are recovering equity lost during the Great Recession,’ says Daren Blomquist, vice president of RealtyTrac, in a statement. ‘For instance, home price appreciation in California was at 16 percent in May 2014 compared to a high of 31 percent in July and August of 2013. In Arizona, home price appreciation has slowed to six percent annually compared to a high of 24 percent last year.

‘In addition, many of the properties that are seriously underwater are in a deep negative equity hole that will take some time to dig out of,’ Blomquist adds. ‘The average loan-to-value on the 9.1 million homes seriously underwater was 133 percent, and the average loan-to-value on the homes in foreclosure that are seriously underwater was 134 percent.’

States with the highest percentage of residential properties seriously underwater in the second quarter were Nevada (32%), Florida (30%), Illinois (30%), Rhode Island (29%) and Michigan (27%).

Metropolitan areas with the highest percentage of residential properties seriously underwater were Lakeland, Fla. (37%); Las Vegas (35%); Cleveland (35%); Palm Bay-Melbourne-Titusville, Fla. (32%); Chicago (30%); Cape Coral-Fort Myers, Fla. (30%); and New Haven-Milford, Conn. (30%).

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