More than a quarter of a million homeowners emerged from
underwater the first quarter of 2015, an increase of $694 billion in positive
equity in homes during the quarter.
CoreLogic said the total number of mortgaged residential properties with
equity increased by 254,000 to approximately 44.9 million units or 90 percent
of all mortgaged properties.
The company estimates that about 5.1 million homeowners
remain in a negative equity position, 10.2 percent of homes with a mortgage,
compared to 5.4 million or 10.8 percent in the fourth quarter of 2014, a
quarter-over-quarter decrease of 4.7 percent
Since the first quarter of 2014 1.2 million homes have gained positive
equity, an increase of 19.4 percent.
Having negative equity means a borrower
owes more on a home mortgage than the home is worth because of a decline in
home value, an increase in mortgage debt, or both. These borrowers are often referred to as "upside
down" or "underwater."
The national aggregate value of
negative equity was $337.4 billion at the end of Q1 2015, falling approximately
$11.7 billion from $349.1 billion in Q4 2014. On a year-over-year basis, the
value of negative equity declined overall from $388 billion in Q1 2014,
representing a decrease of 13 percent in 12 months.
As other negative equity studies (Zillow,
Black Knight Financial Services) have pointed out, there is a much higher
incidence of negative equity at the lower end of the market. CoreLogic says that 94 percent of homes
valued over $200,000 have equity compared to only 85 percent of those under $200k.
In addition to the homes with negative
equity there are an estimated 9.7 million or 19.4 percent of mortgaged homes that
are what CoreLogic calls "under-equitied," or having less than 20 percent equity,
and 1.3 million of those have near-negative equity, less than 5 percent. These homeowners may have a more difficult
time refinancing existing homes or selling and buying anew because of the lack
of a downpayment. On the lower end of this under-equitied group there is a risk
of moving into negative territory if home prices fall.
"The CoreLogic Home Price Index
for the U.S. was up 2.5 percent during the first quarter of 2015, which has
improved the equity position of homeowners," said Frank Nothaft, chief economist
for CoreLogic. "About 90 percent of homeowners now have housing equity
and, as a result, have experienced an increase in wealth, which can spur
additional consumption and investment expenditures. The remaining 10 percent of
owners with negative equity will find their home value rising while they
continue to pay down principal on their amortizing mortgage loan."
"Many homeowners are emerging from
the negative equity trap, which bodes well for a continued recovery in the
housing market," said Anand Nallathambi, president and CEO of CoreLogic.
"With the economy improving and homeowners building equity, albeit slowly,
the potential exists for an increase in housing stock available for sale, which
would ease the current imbalance in supply and demand. There are still about 5
million homeowners who are underwater and we estimate that a further 5 percent
appreciation in home values across the U.S. would reduce the number of owners
with negative equity by about one million."
The highest percentage of negative
equity is in Nevada at 23.1 percent followed by Florida (21.2 percent),
Illinois (16.8 percent), Arizona (16.8 percent) and Rhode Island (15.7
percent). These five states together accounted for 31.4 percent of negative
equity in the U.S.
Of the total $337 billion in negative
equity, first liens without home equity loans accounted for over half at $181
billion, or 53 percent, in aggregate negative equity, while first liens with
home equity loans accounted for $157 billion, or 47 percent. The 3.1 million underwater borrowers with
only one lien had an average mortgage balance of $229,000 and were underwater
by $58,000. The 2 million with both
first and second liens owned a combined balance of $295,000 and had $78,000 in
negative equity.