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Mortgage

1 in 6 homes still seriously underwater as home price growth slows

Down 26% from 2013, but decline slowed with slowing price gains

In the second quarter some 9.1 million U.S. residential properties were seriously underwater — where the combined loan amount secured by the property is at least 25% higher than the property’s estimated market value — representing 17% of all properties with a mortgage, RealtyTrac reports.

The second quarter of 2014 saw a percentage decrease in homes that were seriously underwater — 17.2% versus 17.4% in the first quarter of 2014 — bringing it to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012.

“Home price appreciation has slowed in the last few months in many of the markets with the most underwater homes, slowing the pace at which homeowners are recovering equity lost during the Great Recession,” said Daren Blomquist, vice president at RealtyTrac. “For instance, annual home price appreciation in California was at 16% in May 2014 compared to a high of 31% in July and August of 2013. In Arizona, home price appreciation has slowed to 6% annually compared to a high of 24% last year.

Click the image to enlarge.

“In addition many of the properties that are seriously underwater are in a deep negative equity hole that will take some time to dig out of,” Blomquist continued. “The average loan-to-value on the 9.1 million homes seriously underwater was 133%, and the average loan-to-value on the homes in foreclosure that are seriously underwater was 134%.”

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% equity — held steady from the first quarter at 9.9 million in the second quarter of 2014, representing 18.8% of all properties with a mortgage.

  Click the image to enlarge.

Another 8.8 million properties were on the verge of resurfacing equity in the second quarter of 2014, with between 10% negative equity and 10% positive equity, representing 17% of all properties with a mortgage, up from 8.5 million representing 16% of all properties with a mortgage in the first quarter of 2014.

Fewer distressed properties had negative equity in the second quarter, with 44% of all properties in the foreclosure process seriously underwater — down from 45% in the first quarter of 2014 and down from 57% in the second quarter of 2013. The share of foreclosures with positive equity decreased to 34% in the second quarter, down from 35% in the first quarter. Top states for foreclosures with equity include Colorado, Texas, Oklahoma, Hawaii and Louisiana.

For details on the markets with the most negative equity, the most resurfacing equity, and more, click below. 

Markets with the most negative equity

States with the highest percentage of residential properties seriously underwater in the second quarter were Nevada (32%), Florida (30%), Illinois (30%), Rhode Island (29%) and Michigan (27%).

Major metropolitan statistical areas (population 500,000 or more) with the highest percentage of residential properties seriously underwater were Lakeland, Fla (37%), Las Vegas (35%), Cleveland (35%), Palm Bay-Melbourne-Titusville, Fla (32%), Chicago (30%), Cape Coral-Fort Meyers, Fla (30%), and New Haven-Milford, CT (30%).

Markets with the most resurfacing equity

Major metro areas with the highest percentage of resurfacing equity – between negative 10% and positive 10% – were Colorado Springs, Colo., (28%), Albuquerque NM (22%), Lancaster, PA (22%), El Paso, TX (22%), Salt Lake City (22%) and Worcester, MA (22%).

Markets with the most equity-rich properties

Major metro areas with the highest percentage of equity rich properties – those with at least 50% equity – were San Francisco (37%), Honolulu (36%), Los Angeles (32%), New York (29%), Oxnard (28%), and San Diego (28%).

 

 

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