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CoreLogic: 4 million homeowners back above water in 2013

6.5 million remain underwater, equity gains slow

underwater homeowner
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CoreLogic’s new report for the end of 2013 shows that 4 million homes returned to positive equity in 2013, bringing the total number of mortgaged homes with equity to 42.7 million.

CoreLogic says that nearly 6.5 million homes, or 13.3% of all residential properties with a mortgage, were still in negative equity at the end of 2013.

Negative equity means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

"The plight of the underwater borrower has improved dramatically since negative equity peaked in December 2009 when more than 12 million mortgaged homeowners were underwater," said Mark Fleming, chief economist for CoreLogic. "Over the past four years, more than 5.5 million homeowners have regained equity, reducing their risk of foreclosure and unlocking pent-up supply in the housing market."

Because home price growth slowed significantly in the fourth quarter of 2013 the negative equity share was virtually unchanged from the end of the third quarter of 2013.

"During 2013, more than 4 million property owners were able to regain equity due in large part to home price appreciation," said Anand Nallathambi, president and CEO of CoreLogic. "Only 14 states have a higher negative equity average than the U.S., and more states should experience improvement throughout 2014."

For the homes in negative equity status, the national aggregate value of negative equity was $398.4 billion for fourth quarter 2013, compared to $401.3 billion for third quarter 2013, a decrease of $2.9 billion.  

Some 3.9 million upside-down borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $219,000. The average underwater amount is $52,000.

Of the 42.7 million residential properties with positive equity, 10 million have less than 20% equity. Borrowers with less than 20% equity, referred to as "under-equitied," may have a more difficult time obtaining new financing for their homes due to underwriting constraints.

Nevada had the highest percentage of mortgaged properties in negative equity at 30.4%, followed by Florida (28.1%), Arizona (21.5%), Ohio (19.0%) and Illinois (18.7%). Together they account for 36.9% of negative equity in the United States.

At the MSA level, Orlando-Kissimmee-Sanford, Fla., had the highest percentage of mortgaged properties in negative equity at 31.5%, followed by Tampa-St. Petersburg-Clearwater, Fla. (30.4%), Phoenix-Mesa-Scottsdale, Ariz. (22.1%), Chicago-Naperville-Arlington Heights, Ill. (21.4%) and Atlanta-Sandy Springs-Roswell, Ga. (19.9%).

First liens without home equity loans accounted for $205 billion aggregate negative equity, while first liens with home equity loans accounted for $193 billion.

About 2.6 million upside-down borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $293,000. The average underwater amount is $75,000.

The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 92% of homes valued at greater than $200,000 have equity compared with 81%  of homes valued at less than $200,000.

Under-equitied mortgages accounted for 21.1% of all residential properties with a mortgage nationwide in 2013, with more than 1.6 million residential properties at less than 5% equity, referred to as near-negative equity. Properties that are near-negative equity are considered at risk if home prices fall.

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