Underwater homes decrease 19%
Many homeowners regained equity in the second quarter and rising home prices pushed up home values, according to the latest report from CoreLogic, a global property information, analytics and data-enabled solutions provider.
The report showed 548,000 homeowners regained equity in the second quarter. This means 92.9% of all mortgaged properties now have positive equity, or about 47.2 million homes. Home equity grew 9.9%, or $646 billion, from the second quarter last year.
The number of homes underwater decreased to 7.1% in the second quarter. This is a decrease of 13.2% from the first quarter’s 8.2%, and a decrease of 19% from last year’s 8.9%.
“Home-value gains have played a large part in restoring home equity,” CoreLogic Chief Economist Frank Nothaft said.
“The CoreLogic Home Price Index for the U.S. recorded 5.2% growth in the year through June, an important reason that the number of owners with negative equity fell by 850,000 in the second quarter from a year earlier,” Nothaft said.
Negative equity, sometimes referred to as underwater or upside down, means a borrower owes more on their mortgages than what their home is worth. Negative equity can be a result of a decline in home value, an increase in mortgage debt, or both.
Of the over 50 million homes with a mortgage, about 8.6 million, or 17% have less than 20% in equity. About 965,000, or 1.9% have less than 5% equity.
Borrowers who are under-equities sometimes have a hard time refinancing their homes, or getting new financing to sell and buy another home. These borrowers are also more at-risk of moving into negative equity if home prices decrease.
That being said, they may still have time. Home prices are expected to continue going up for now.
“We see home prices rising another 5% in the coming year based on the latest projected national CoreLogic Home Price Index,” CoreLogic President and CEO Anand Nallathambi said. “Assuming this growth is uniform across the U.S., that should release an additional 700,000 homeowners from the scourge of negative equity.”
Other experts agree that negative equity is decreasing, but differ on by how much.
Negative equity decreased in the second quarter, and underwater homes concentrated more in urban areas than in the suburbs, the Negative Equity report from Zillow shows.
In the second quarter, negative equity, the point where a homeowner owes more on a home than what it’s worth, decreased to 12.1%. This is down from 12.7% last quarter and 14.4% last year.