Mortgage

RealtyTrac: Number of seriously underwater foreclosures falls to new low

Overall total of seriously underwater properties fell 500K in third quarter

The number of properties classified as “seriously underwater,” where the homeowner owes at least 25% more than the estimated value of the home, fell significantly during the third quarter thanks to a surge in home sales volume and prices, according to RealtyTrac’s Q3 2015 Underwater & Home Equity Report.

According to RealtyTrac, there were 6.9 million seriously underwater U.S. residential properties at the end of the third quarter, down more than half a million from the previous quarter and down more than 1.2 million compared to a year ago.

The third quarter underwater numbers were down from 7,443,580 seriously underwater homes representing 13.3% of all homes with a mortgage in the previous quarter and at the lowest level for both total mortgages and share of mortgages since RealtyTrac began tracking underwater data in the first quarter of 2012, the company said.

The number and share of seriously underwater homes peaked in the second quarter of 2012 at 12,824,729 seriously underwater homes representing 28.6% of all homes with a mortgage.

Additionally, the share of distressed properties — those in some stage of the foreclosure — that were underwater at the end of the third quarter were also at the lowest level since the first quarter of 2012.

As of the end of the third quarter, 33.4% of distressed properties were seriously underwater, down 1 percentage point from the previous quarter and down 5.5 percentage points year over year.

On the other end of the spectrum, the share of properties in foreclosure with positive equity increased to 43.4% in the third quarter, up slightly from 42.4% in the second quarter and up from 38.5% in the third quarter of 2014.

Additionally, RealtyTrac reports that there are 10.5 million “equity rich” U.S. residential properties, meaning those with at least 50% equity, at the end of the third quarter, down nearly a half million from the second quarter.

According to RealtyTrac, the decrease is due to more homeowners with equity leveraging that equity with a refinance, a move-up sale and purchase or by cashing out of the housing market completely.

“After a lull late last year and early this year, home sales volume and average sales prices picked up dramatically again in the second and third quarters of this year, resulting in a substantial drop in seriously underwater homeowners,” said Daren Blomquist, vice president at RealtyTrac. “On the other hand, the number and share of equity rich homeowners also dropped dramatically between the second and third quarters — continuing a trend from the previous two quarters — evidence that more homeowners in this category are leveraging their equity through a refinance, move-up sale or by completely cashing out of the housing market.”

Out of the top 10 markets with a population greater than 500,000 that had the highest percentage of seriously underwater properties, Florida markets took up six spots in Q3 2015.

Top on the list was Lakeland, Florida, (28%), followed by Las Vegas, Nevada (27.3%), Cleveland, Ohio (27.2%), Deltona-Daytona Beach, Florida (26.7%), Orlando, Florida (25.6%), Tampa, Florida (24.3%), Toledo, Ohio (24.1%), Chicago, Illinois (24%), Palm Bay, Florida (24%) and rounding at the top 10 Jacksonville, Florida (23.8%).

Markets where the share of distressed properties — those in some stage of foreclosure — that were seriously underwater exceeded 50% in the second quarter of 2015 included Deltona-Daytona Beach, Florida (58.5%), Las Vegas, Nevada (56.5%), Lakeland, Florida (55.8%), Palm Bay, Florida (54.1%), Cleveland, Ohio (53.4%), Chicago, Illinois (52.6%), Tampa, Florida (52.3%), and Orlando, Florida (51.7%).

Major markets where the share of in-foreclosure properties with positive equity exceeded 60% included Denver, Colorado (85.9%), Austin, Texas (83.3%), Honolulu, Hawaii (79.5%), Scranton, Pennsylvania (77.8%), San Jose, California (77.3%), Pittsburgh, Pennsylvania (75.9%), McAllen, Texas (75.6%), Baton Rouge, Louisiana (71.6%) and Nashville, Tennessee (71.4%).

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