Home Equity Growth Stalled in Fourth Quarter

An additional 4 million homes regained positive equity in 2013 CoreLogic said today, leaving 6.5 million homes still underwater; about half the number that were in that position at the end of 2009.  Homes still in a negative equity position constitute 13.3 percent of all residential properties with a mortgage while 42.7 million homeowners now have at least some equity.

While the negative equity problem has been slowly resolving CoreLogic said that the percentage of homes underwater was virtually unchanged from the end of the third quarter.  This is due to a slowdown in the quarterly growth rate of CoreLogic's Home Price Index (HPI.)

While homeowners are seeing the net worth of their homes increase, many of the margins are still narrow.  CoreLogic says that about 10 million of the homes in positive equity have less than 20 percent and may have a difficult time refinancing their homes.  These "under-equitied" properties accounted for 21.1 percent of mortgaged homes nationwide.  More than 1.6 million properties are referred to as "near-negative equity," that is having less than 5 percent equity and these remain in danger of slipping back underwater if home prices decline. 

"The plight of the underwater borrower has improved dramatically since negative equity peaked in December 2009 when more than 12 million mortgaged homeowners were underwater," said Mark Fleming, chief economist for CoreLogic. "Over the past four years, more than 5.5 million homeowners have regained equity, reducing their risk of foreclosure and unlocking pent-up supply in the housing market."

The national aggregate value of negative equity was $398.4 billion for fourth quarter 2013, compared to $401.3 billion for third quarter 2013, a decrease of $2.9 billion. Homes with only one mortgage account for slightly more than half of the $398 billion - $205 billion - and about two-third of underwater homeowners, 3.9 million.  The 2.6 million properties with both a first mortgage and a home equity loan account for $193 billion. Homes with one mortgage were underwater an average of $52,000 while homes with two mortgages had an average of $75,000 in negative equity

Nevada continues to have the highest percentage of underwater homes at 30.4 percent.  In Florida 28.1 percent of mortgaged homes lack equity and in Arizona 21.5 percent, followed by Ohio (19.0 percent), and Illinois (18.7 percent.)  These five states combine to account for 36.9 percent of all negative equity in the country.  Four of the five large metropolitan areas with the highest levels of negative equity are in these states, two in Florida (Orlando-Kissimmee and Tampa-St. Petersburg-Clearwater) and one each in Arizona (Phoenix) and Illinois (Chicago).  Atlanta rounds out the top five.   

The bulk of 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 81 percent of homes valued at less than $200,000.

"Stability and growth in the housing market are essential for a durable recovery of the U.S. economy," said Anand Nallathambi, president and CEO of CoreLogic. "The rebound in home prices in 2013 helped 4 million property owners regain at least some positive equity in their largest asset-their home. We still have a long way to go to eliminate the negative equity overhang but significant progress is being made every day across most of the country."