CoreLogic Confirms Improving Equity Picture, but Pace may Change

While they don't agree on the numbers or use the same timeframes, the two reports on underwater mortgages released in the last week do conclude that homeowners are rapidly recapturing the equity they lost so suddenly late in the last decade.  Last week RealtyTrac announced its findings that some 600,000 homeowners had emerged from being "deeply underwater" (that is with loan-to-value ratios in excess of 125 percent) just since May.  Today CoreLogic said that more than 2.5 million more residential properties became equity-positive during the second quarter.

The CoreLogic report put the number of mortgaged residential properties with equity at 41.5 million and the number still underwater at 7.1 million or 14.5 percent of all homes with a mortgage. At the end of the previous quarter there were 9.6 million homes or 19.7 percent that were underwater.

Of those properties with positive equity CoreLogic says 10.3 million or 21.1 percent have less than 20 percent equity which means their owners may have difficulty refinancing or selling their homes due to underwriting constraints.  Of these 1.7 million properties had less than 5 percent equity and are at risk of being in negative territory again with even a slight decline in home prices. 

The national aggregate value of negative equity was $428 billion at the end of the second quarter compared to $576 billion at the end of the first quarter of 2013, a decrease of more than $148 billion, driven in large part, according to CoreLogic by an improvement in home prices.

Of the total negative equity $217 billion or about half belonged to some 4.3 million borrowers with only one mortgage on their property.  These borrowers were underwater an average of $51,000.  Some 2.8 million homeowners had home equity loans in addition to first mortgages and accounted for the remaining $211 billion in aggregate negative equity.  Their average underwater amount was $75,000

"Equity rebuilding continued in the second quarter of this year as the share of underwater mortgaged homes fell to 14.5 percent," said Dr. Mark Fleming, chief economist for CoreLogic. "In just the first half of 2013 almost three and a half million homeowners have returned to positive equity, but the pace of improvement will likely slow as price appreciation moderates in the second half."

 "Price appreciation obviously had a positive impact on home equity over the first half of 2013, especially the second quarter," said Anand Nallathambi, president and CEO of CoreLogic. "Despite the substantial decrease in negative equity, there's more ground left to gain with the 7.1 million U.S. residences that remain underwater."

The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 91 percent of homes valued at greater than $200,000 have equity compared with 80 percent of homes valued at less than $200,000.

Negative equity was highest in Nevada (36.4 percent), Florida (31.5 percent), Arizona (24.7 percent), Michigan (22.5 percent), and Georgia (20.7 percent). These top five states combined account for 34.9 percent of negative equity in the U.S.