Rising Prices Slowly Eroding National Negative Equity

Rising home prices lifted 200,000 homes into a positive equity position in the fourth quarter of 2012.  A total of 1.7 million homes regained equity during 2012 according to CoreLogic's negative equity report released on Tuesday.  There are now 38.1 million homes with mortgages that now have positive equity nationwide while 10.4 million or 21.5 percent of all properties with a mortgage remain in negative territory.  Another 11.3 million or 23.2 percent have equity but at a rate below 20 percent.

CoreLogic said that 1.8 million of the underwater homeowners have a loan to value ratio between 100 and 105 percent.  Should home prices increase another 5 percent these "near equity" homeowners would be back in a positive equity position.   There were 4.4 million properties or 9.1 percent with LTVs exceeding 125 percent in the fourth quarter.

The national aggregate negative equity decreased from $670 billion at the end of the third quarter to $628 billion at the end of the fourth quarter of 2012.  At the end of the fourth quarter of 2011 the aggregate negative equity was $743 billion.

There were 6.5 million borrowers with negative equity and only a senior lien in the fourth quarter while 3.9 million borrowers had both first mortgages and home equity loans but the $628 in negative equity was almost evenly divided between the two groups.   The average mortgage balance for homeowners with only one lien was $213,000 and the average underwater amount was $45,000.  Those homeowners with both first and second mortgages had balances averaging $296,000 and were underwater an average of $80,000.

The bulk of equity is concentrated in the high end of the housing market.  Eight-six percent of homes valued at more than $200,000 have equity compared to 72 percent of homes valued below that level.

Anand Nallathambi, president and CEO of CoreLogic said, "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.  The trend toward more homeowners moving back into positive equity territory should continue in 2013."

North Dakota had the highest percent of mortgaged residential properties in a positive equity position at 94.4 percent followed by Maine (92.1 percent), New York (91.7 Percent, and Alaska (91.6 percent.)  Nevada had the highest proportion of underwater properties at 52.4 percent followed by Florida at 40.2 percent.  Arizona, Georgia, and Michigan each had over 31 percent of mortgaged homes in a negative position and these five states together had about one third of all of the underwater homes in the country.