17% of homes with a mortgage seriously underwater
Share of underwaters continues slow decline
Fully 9.1 million U.S. residential properties were seriously underwater, representing 17% of all properties with a mortgage in the first quarter, according to RealtyTrac’s U.S. Home Equity & Underwater Report for the first quarter of 2014.
To be seriously underwater, the combined loan amount secured by the property is at least 25% higher than the property’s market value. The first quarter negative equity numbers were down to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012.
In the fourth quarter of 2013, 9.3 million residential properties representing 19% of all properties with a mortgage were seriously underwater, and in the first quarter of 2013 10.9 million residential properties representing 26% of all properties with a mortgage were seriously underwater.
“U.S. homeowners are continuing to recover equity lost during the Great Recession, but the pace of that recovering equity slowed in the first quarter, corresponding to slowing home price appreciation,” said Daren Blomquist, vice president at RealtyTrac. “Slower price appreciation means the 9 million homeowners seriously underwater could still have a long road back to positive equity.”
The recent peak in negative equity was the second quarter of 2012, when 12.8 million U.S. residential properties representing 29% of all properties with a mortgage were seriously underwater.
The universe of equity-rich properties — those with at least 50 percent equity — grew to 9.9 million representing 19% of all properties with a mortgage in the first quarter, up from 9.1 million representing 18% of all properties with a mortgage in the fourth quarter of 2013.
Another 8.5 million properties were on the verge of resurfacing in the first quarter, with between 10% negative equity and 10% positive equity. This segment represented 16% of all properties with a mortgage in the first quarter.
That was compared to 8.3 million properties representing 17% of all properties with a mortgage in the fourth quarter of 2013.
Fewer distressed properties had negative equity in the first quarter, with 45% of all properties in the foreclosure process seriously underwater — down from 48% in the fourth quarter of 2013 and down from 58 percent in the first quarter of 2013.
Conversely, the share of foreclosures with positive equity increased to 35% in the first quarter, up from 31% in the fourth quarter and up from 24% in the third quarter of 2013.
“The relatively high percentage of foreclosures with equity is surprising to many because it would seem homeowners with equity could easily avoid foreclosure by leveraging that equity by refinancing or with an equity sale of the home,” Blomquist noted. “But many distressed homeowners with equity may not realize they have equity and in some cases have vacated the property already, assuming that foreclosure is inevitable.”
“Underwater properties have become an insignificant part of the housing market in Orange County,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. “Out of the nearly 40,000 properties we currently have listed only about 3,000 of those are distressed or short sale properties, proving that the continual rise in home prices is relieving the housing market of underwater homeowners.”