About 7.1 million residential properties – or about 13% of all properties with a mortgage – were seriously underwater in the fourth quarter, according to RealtyTrac's U.S. Home Equity & Underwater Report. That's the lowest level since the first quarter of 2012, when home prices bottomed out, the firm says.
RealtyTrac defines ‘underwater’ as when the combined loan amount secured by the property is at least 25% higher than the property's estimated market value.
For comparison purposes, in the second quarter of 2012, there were about 12.8 million seriously underwater homeowners representing 29% of all properties with a mortgage.
‘Median home prices nationwide bottomed out in March 2012 and since then have increased 35%, lifting 5.8 million homeowners out of seriously underwater territory,’ says Daren Blomquist, vice president at RealtyTrac, in a release. ‘While the remaining seriously underwater properties continue to be a millstone around the neck of some local markets, the growing number of equity-rich homeowners should help counteract the downward pull of negative equity in many markets, empowering those housing markets – and by extension, their local economies – to walk on water in 2015.’
About 11.2 million properties, or about 20% of all homes with a mortgage, were ‘equity rich’ – meaning they have more than 50% positive equity – at the end of 2014, according to the report. That's up nearly 2.2 million from about 9.1 million equity-rich properties at the end of 2013.
Interestingly, but perhaps not surprisingly, the share of distressed properties – those in some stage of foreclosure – with positive equity surpassed the share of distressed properties that were seriously underwater in the fourth quarter, for the first time since RealtyTrac began tracking the data about a year ago. This is also due mainly to rising home prices.
At the end of the fourth quarter, 42% of distressed properties had some positive equity compared to 31% a year ago. Meanwhile, 35% of distressed properties were seriously underwater, compared to 48% a year ago.