March 20th, 2013
Econintersect: The fourth quarter of 2012 saw 200,000 homes with equity positions emerging from underwater. That brings the total of mortgaged residences worth more than their mortgage balance to 38.1 million, according to the latest report from CoreLogic. That compares to 39.8 million homes underwater at the end of 2011. There are still 10.4 million homes with mortgage balances larger than market value, 21.5% of all mortgages. There are 2.3 million homes with less than 5% equity ("near-negative equity") and often have nearly the same refinancing or selling difficulty as underwater homes. Thus 12.7 million (26.2%) homes are "encumbered" with respect to selling.
Problem mortgages decrease as home vales incres, as shown in the following graph.
Click on graph for larger image.
There are major divergences in mortgage problems across the 50 states. Nevada, Florida and Arizona, three of the "big, bad four" at the height of the crisis, are still in very poor shape. The fourth state, California has moved up the scale, but is still ninth. Georgia, Michigan, Illinois and Ohio are now in worse shape than California.
Click on map for larger image.
The map provided by CoreLogic shows how the mortgage problems are concentrated by county. In spite of California's improvement in the ranking, vast areas of the Inland Empire and the southern desert are still "on fire."
Here is the full press release from CoreLogic:
CORELOGIC REPORTS 200,000 MORE RESIDENTIAL PROPERTIES RETURN TO POSITIVE EQUITY IN FOURTH QUARTER OF 2012
––10.4 Million Residential Properties with a Mortgage Still in Negative Equity––
IRVINE, Calif., March 19, 2013––CoreLogic® (NYSE: CLGX), a leading provider of information, analytics and business services, today released new analysis showing approximately 200,000 more residential properties returned to a state of positive equity during the fourth quarter of 2012. This brings the total number of properties that moved from negative to positive equity in 2012 to 1.7 million and the number of mortgaged residential properties with equity to 38.1 million. The analysis also shows that 10.4 million, or 21.5 percent of all residential properties with a mortgage, were still in negative equity at the end of the fourth quarter of 2012. This figure is down from 10.6 million* properties, or 22 percent, at the end of the third quarter of 2012.
Negative equity, often referred to as “underwater” or “upside down,” 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 national aggregate value of negative equity decreased $42 billion to $628 billion at the end of the fourth quarter from $670 billion at the end of the third quarter in 2012. This decrease was driven in large part by an improvement in home prices.
Of the 38.1 million residential properties with positive equity, 11.3 million have less than 20 percent equity. Borrowers with less than 20 percent equity, referred to as “under-equitied,” may have a more difficult time obtaining new financing for their homes due to underwriting constraints. At the end of the fourth quarter, 2.3 million residential properties had less than 5 percent equity, referred to as near-negative equity. Properties that are near negative equity are at risk should home prices fall. Under-equitied mortgages accounted for 23.2 percent of all residential properties with a mortgage nationwide in the fourth quarter of 2012. The average amount of equity for all properties with a mortgage is 31 percent.
“In the fourth quarter we again saw an improvement in the equity position of households,” said Dr. Mark Fleming, chief economist for CoreLogic. “Housing market improvements, particularly in the hardest hit states, are the catalyst for households to regain equity and become participants in 2013’s housing market.”
“The scourge of negative equity continues to recede across the country. There is certainly more to do but with fewer borrowers underwater, the fundamentals underpinning the housing market will continue to strengthen,” said Anand Nallathambi, president and CEO of CoreLogic. “The trend toward more homeowners moving back into positive equity territory should continue in 2013.”
Highlights as of Q4 2012:
- Nevada had the highest percentage of mortgaged properties in negative equity at 52.4 percent, followed by Florida (40.2 percent), Arizona (34.9 percent), Georgia (33.8 percent) and Michigan (31.9 percent). These top five states combined account for 32.7 percent of negative equity in the U.S.
- Of the largest 25 metropolitan areas, Tampa-St. Petersburg-Clearwater, Fla. had the highest percentage of mortgaged properties in negative equity at 44.1 percent, followed by Miami-Miami Beach-Kendall, Fla. (40.7 percent), Atlanta-Sandy Springs-Marietta, Ga. (38.1 percent), Phoenix-Mesa-Glendale, Ariz. (36.6 percent), and Riverside-San Bernardino-Ontario, Calif. (35.7 percent).
- Of the total $628 billion in negative equity, first liens without home equity loans accounted for $313 billion aggregate negative equity, while first liens with home equity loans accounted for $315 billion.
- 6.5 million upside-down borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $213,000. The average underwater amount is $45,000.
- 3.9 million upside-down borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $296,000.The average underwater amount is $80,000.
- The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 86 percent of homes valued at greater than $200,000 have equity compared with 72 percent of homes valued at less than $200,000.
*Third Quarter 2012 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.
The full Equity Report with additional charts is available here.