U.S. Housing Markets Continuing Improvement — Home Equity Rising

After the implosion of most housing markets across the country in 2007, millions of homeowners saw their home equity evaporate into the air. An estimated 12 million homeowners entered negative equity territory when their mortgage loan balances exceeded the respective home value at the peak of the housing bust in December 2009.

Good news today is that the previously evaporated home equity is now condensing as many homeowners reenter positive net worth in their homes. CoreLogic estimates that as of the end of Q1 2014, there are now just one half of the peak underwater homes, now totaling 6.3 million or 12.7 percent of all homes having a mortgage loan. Q1 2014 saw an estimated 312,000 properties reenter positive net worth territory. Just one year ago in Q1 2013, CoreLogic reported that 850,000 homeowners had returned to positive equity that quarter and that 9.7 million homes remained underwater (19.8 percent of all homes with mortgages). And in Q1 2012, there remained 10.5 million underwater (21.7 percent).

Highlights of the Q1 2014 CoreLogic equity report include:

  • A 5 percent increase in home prices would result in 1.2 million more homes entering the net equity territory
  • Total negative equity as of the end of Q1 2014 was $383.7 billion, a decline of $16.9 billion in the quarter
  • Under-Equitied Borrowers (those with less than 20 percent home equity) make up 20.6 percent of all properties – 10 million of the 43 million homes with a mortgage loan, down from 23 percent a year ago
  • 3.2 percent of all homes with mortgage loans had less than 5 percent equity at the end of Q1 2014. These loans are referred to as Near-Negative-Equity properties by CoreLogic since a small decline in home values slips this group back to the underwater side of the equation. A year ago 4.4 percent of homes were so classified.
  • The average loan-to-value ratio, which a year ago stood at 67.2 percent, has shrunk to 60.8 percent. In Q1 2010 it was 71.3 percent.
  • A surprise was that the average negative equity at the end of Q1 2014 for homes underwater was 33.0 percent, essentially unchanged from the 32.8 percent average a year ago. Q1 2014 saw an average loan balance of $218,000 with a corresponding $52,000 underwater component compared to a $211,000 average loan balance and $48,000 in negative equity at the end of Q1 2013.
  • Higher-end homes carry more equity, with 93 percent of homes valued greater than $200,000 with home equity versus just 82 percent of homes less than $200,000 at the end of Q1 2014. A year ago the numbers were 88 percent and 73 percent, respectively.
  • The top five states with negative equity as of Q1 2014 mad up 31.1 percent of all negative equity in the country. The following table lists the top and bottom five states regarding home equity status:

6-30-14 table1

The five metropolitan statistical areas with the most and least negative equity status are included in the following tables:

6-30-14 table2

CoreLogic reports quarterly on this topic in their CoreLogic® Equity Report. To read the latest version including a complete listing of these metrics by state click http://www.corelogic.com/research/negative-equity/corelogic-q1-2014-equity-report.pdf

The bottom line is that housing markets continue to recover and improve at a pace much quicker than anticipated – and that is good news for homeowners and the economy overall.

Ted

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