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Homeowners with negative equity declines for second consecutive quarter

Dennis Norman

After a couple of days of writing about bad reports on the housing market (existing home sales and new home sales to name two) I’m excited that I actually get to write something today that is positive!  According to newly released data from CoreLogic, the percentage of homeowners in the U.S. with negative equity in their homes declined slightly at the end of the second quarter of 2010 making it the second consecutive month of declines.

According to the CoreLogic report, 11 million, or 23 percent, of all residential properties with mortgages were in negative equity at the end of the second quarter of 2010, down from 11.2 million and 24 percent from the first quarter of 2010.  Unfortunately as much I would like to say this was from home price appreciation, unfortunately it appears to have been driven primarily by foreclosures removing some of the homes with negative equity from the scene. 

In addition to the 11 million homeowners that are underwater, there are an additional 2.4 million borrowers had less than five percent equity. Together, negative equity and near-negative equity mortgages accounted for nearly 28 percent of all residential properties with a mortgage nationwide.

Highlights from the report:

  • Negative equity remains concentrated in five states: Nevada, which had the highest percentage negative equity with 68 percent of all of its mortgaged properties underwater, followed by Arizona (50 percent), Florida (46 percent), Michigan (38 percent) and California (33 percent).
  • The biggest declines in negative equity were concentrated in the hardest hit states. Nevada experienced an 11.8 percentage point decline in negative equity share, followed by California (-1.3), Florida (-1.3), and Arizona (-1.3). About two-thirds of all states experienced a decline in negative equity share. Since peaking in the 4th quarter of 2009, the number of borrowers in a negative equity position has declined by about 350,000.
  • The declines were primarily due to foreclosures, not the stabilization or small increases in prices in some markets. The largest decrease in negative equity occurred among those with loan-to-value (LTV) ratios in excess of 125 percent, where the number of negative equity borrowers fell to 4.8 million, down from 5 million last quarter.
  • Homes with more equity are appreciating faster than underwater homes. The average values of properties with 50 percent or more equity increased over 1 percent between the 4th quarter of 2009 and the 2nd quarter of  2010. Properties with 25 to 50 percent in equity increased an average of 0.2 percent in that period. However, values fell for every segment in negative equity, with the biggest value decline occurring for properties that are 50 percent or more in negative equity.

Chart

Source: CoreLogic

Chart

Source: CoreLogic

Chart

Source: CoreLogic

 

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