Negative equity amounts continued to
shrink during the third quarter of 2013 CoreLogic said today. An estimated 791,000 properties regained an equity
position during the quarter, leaving about 6.4 million homes “under water.”
CoreLogic’s latest negative equity
analysis reports that about 13 percent of all mortgaged homes in the U.S.
remain in negative territory compared to 14.7 percent or 7.2 million homes at
the end of the second quarter.
A house is said to have negative
equity or be underwater when more is owed on the mortgage than the market value
of the property. Negative equity can
occur because of a decline in value, an increase in mortgage debt or a
combination of both.
The national aggregate value of
negative equity was $397 billion at the end of the third quarter compared to
$430 billion at the end of the second quarter of 2013, a decrease of $33.7
billion. This decrease was driven in large part by an improvement in home
There are an estimated 42.6 million
homes in the U.S. with positive equity, but 10 million or over one-fifth of
them (20.4 percent) have less than 20 percent equity, what CoreLogic calls
being “under-equitied. Their owners may
have difficulty refinancing because of underwriting requirements and their
ability to buy in order to move may be similarly constrained. More than 1.5 of these under-equitied owners
have less than 5 percent or what is called near-negative equity and are
considered at risk should home prices fall.
Nevada had the highest incidence of
negative equity, 32.2 percent of all mortgaged homes, followed by Florida (28.8
percent), Arizona (22.5 percent), Ohio (18.0 percent) and Georgia (17.8
percent). These five states together accounted for 36.4 percent of negative
equity in the U.S.
The 3.8 million homeowners with a
single mortgage on their homes accounted for $202 billion of the $397 billion
in aggregate negative equity. Their average mortgage balance is $221,000 and
they are underwater by an average of $53,000.
The 2.5 million homeowners with both a mortgage and a home equity loan have
an average combined balance of $296,000 and are underwater by an average of
The bulk of positive home equity for
mortgaged properties is concentrated at the high end of the housing market. For
example, 92 percent of homes valued at greater than $200,000 have equity
compared with 82 percent of homes valued at less than $200,000.
“Rising home prices continued
to help homeowners regain their lost equity in the third quarter of 2013,”
said Mark Fleming, chief economist for CoreLogic. “Fewer than 7 million
homeowners are underwater, with a total mortgage debt of $1.6 trillion.
Negative equity will decline even further in the coming quarters as the housing
market continues to improve.”
“We should see a further
rebound in consumer confidence and economic growth in 2014 as more homeowners
escape the negative equity trap,” said Anand Nallathambi, president and CEO
of CoreLogic. “Home price appreciation has helped more than 3 million
property owners regain equity since the first quarter of 2013.”