About 7.4 million U.S. residential properties – or about 13.3% of all properties with a mortgage – were seriously underwater in the second quarter, up from about 7.3 million in the first quarter but down from about 9 million in the second quarter of 2014, according to RealtyTrac's Q2 2015 U.S. Home Equity and Underwater Report.
It was the second consecutive quarter with a slight increase in both the number and share of seriously underwater properties, RealtyTrac reports.
The number and share of seriously underwater homes peaked in the second quarter of 2012 at about 12.8 million – or about 28.6% of all homes with a mortgage.
‘Slowing home price appreciation in 2015 has resulted in the share of seriously underwater properties [peaking] at about 13 percent of all properties with a mortgage,’ says Daren Blomquist, vice president at RealtyTrac, in a release. ‘However, the share of homeowners with the double-whammy of seriously underwater properties that are also in foreclosure is continuing to decrease and is now at the lowest level we've seen since we began tracking that metric in the first quarter of 2012.’
About 34.4% of distressed properties were seriously underwater at the end of the second quarter – down from 35.1% in the first quarter and down from 43.6% in the second quarter of 2014 to reach the lowest level since RealtyTrac began tracking the data in first quarter of 2012.
Conversely, the share of foreclosures with positive equity increased to 42.4% in the second quarter – up slightly from 42.1% in the first quarter and up from 34.1% in the second quarter of 2014.
The share of ‘equity-rich’ mortgaged properties – i.e., those with at least 50% equity – was about 10.9 million, or about 19.6% of all properties with a mortgage. That's down from 11.1 million, or 19.8%, at the end of the first quarter and down from 11.3 million, or about 20.3%, at the end of the fourth quarter. But it is still up from 9.9 million, or about 18.9%, at the end of the second quarter of 2014.
‘Although the number of equity-rich homeowners with a mortgage has increased by one million compared to a year ago, that number dropped by nearly 300,000 between the end of 2014 and the middle of 2015,’ Blomquist says. ‘The number of homeowners with a mortgage who have at least 20 percent equity has dropped by more than 900,000 during the past six months, indicating that homeowners who have gained substantial equity thanks to the housing price recovery over the past three years are taking advantage of that newfound equity.
‘Some are leveraging that equity into a higher LTV refinance or a move-up purchase, some may be downsizing into an all-cash purchase and some may be cashing out of homeownership altogether,’ he adds. ‘Those homeowners cashing out of homeownership altogether would explain why the nation's overall homeownership rate continued to decline in the second quarter even as homeownership rates among millennials increased.’
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