Despite the fact that the average U.S. home price increased during the first quarter, the number of homeowners who were “seriously underwater” on their mortgages jumped, due mainly to the many depressed pockets across the country where home appreciation has largely been absent, according to ATTOM Data Solutions.
As of the end of the first quarter there were about 5.5 million seriously underwater residential properties in the U.S., representing about 9.7% of all properties with a mortgage. That’s up from 9.6% in the fourth quarter but down from 12.0% in the first quarter of 2016, according to ATTOM’s Q1 2017 U.S. Home Equity & Underwater Report.
ATTOM defines “seriously underwater” as when the combined loan amount secured by a property is at least 25% higher than the property’s estimated market value.
“While negative equity continued to trend steadily downward in the first quarter, it remains stubbornly high in often-overlooked pockets of the housing market,” says Daren Blomquist, senior vice president at ATTOM Data Solutions, in a statement. “For example, we continue to see one in five properties seriously underwater in several Rust Belt cities along with Las Vegas and central Florida. Additionally, close to one-third of homes valued below $100,000 are still seriously underwater.
“Several of the cities with the biggest quarterly increases in underwater properties saw a corresponding increase in share of distressed sales in the first quarter, creating a drag on overall home values, and in the case of Baton Rouge, [La.], that increase in distressed sales may be in part attributable to the catastrophic flooding there in August 2016,” Blomquist adds. “Across the country, the share of seriously underwater homes was higher in high-risk flood zones.”
States with the highest share of seriously underwater properties as of the end of the first quarter were Nevada (18.9%), Ohio (17.1%), Illinois (16.5%); Louisiana (16.4%) and Missouri (14.5%).
States with the highest share of equity rich properties were Hawaii (38.4%); California (35.8%); New York (34.6%); Vermont (32.8%); and Oregon (31.3%).
Other key statistics revealed in the report include the following:
- Five percent of non-owner occupied (investment) properties with a mortgage were underwater as of the end of the first quarter compared with only 7.0% of owner-occupied properties;
- Eight percent of properties with an estimated market value of $100,000 or less were seriously underwater compared to a seriously underwater rate of 9.3% for properties valued between $100,000 and $300,000; 5.0% for properties valued between $300,000 and $750,000; and 4.8% of properties valued above $750,000; and
- Five percent of properties in high-risk flood zones were seriously underwater while 9.6% of properties not in high-risk flood zones were seriously underwater.