May 27, 2018

Report: 17% of Homes Still Underwater

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Report: 17% of Homes Still Underwater

More home owners are gradually treading above water again on their mortgages, but some are still facing balances that are higher than the estimated value of their homes, according to RealtyTrac’s U.S. Home Equity & Underwater Report for the second quarter of 2014.

The percentage of residential properties still labeled “seriously underwater” on their homes was 17.2 percent in the second quarter, down from 26 percent a year ago and marking the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012. RealtyTrac defines “seriously underwater” as home owners who owe at least 25 percent or more on the estimated market value of their home.

The Latest on Underwater Mortgages:

Still, the road back to equity for many home owners has slowed recently in several markets.

“Home price appreciation has slowed in the last few months in many of the markets with the most underwater homes, slowing the pace at which home owners are recovering equity lost during the Great Recession,” says Daren Blomquist, vice president at RealtyTrac. “For instance home price appreciation in California was at 16 percent in May 2014 compared to a high of 31 percent in July and August of 2013. In Arizona, home price appreciation has slowed to 6 percent annually compared to a high of 24 percent last year. In addition many of the properties that are seriously underwater are in a deep negative equity hole that will take some time to dig out of.”

The average loan-to-value on the 9.1 million homes seriously underwater was 133 percent, and the average loan-to-value on the homes in foreclosure that are seriously underwater was 134 percent, Blomquist notes.

That said, more home owners are on the verge of regaining equity in their homes this year. About 8.8 million properties are on the verge of resurfacing in the second quarter, with between 10 percent negative equity and 10 percent positive equity, according to RealtyTrac’s report. This represents 17 percent of all properties with a mortgage, up from 16 percent or 8.5 million properties with a mortgage in the first quarter of this year.

Meanwhile, about 9.9 million – or 18.8 percent of properties with a mortgage – are equity-rich, meaning the home owners have at least 50 percent equity in their properties. The percentage held steady from the first quarter of this year. The highest percentage of equity-rich properties were in San Francisco (37%); Honolulu (36%); Los Angeles (32%); and New York (29%).

Fewer distressed properties have negative equity, with 44 percent of all properties in the foreclosure process seriously underwater, down from 57 percent a year ago, according to RealtyTrac. Indeed, 34 percent of foreclosures had positive equity in the second quarter, with the top states for foreclosures with equity in Colorado, Texas, Oklahoma, Hawaii, and Louisiana.

5 Markets with the Most Underwater Properties

The markets with the highest percentage of properties that were seriously underwater in the second quarter are:

  1. Nevada (32%)
  2. Florida (30%)
  3. Illinois (30%)
  4. Rhode Island (29%)
  5. Michigan (27%)

6 Metros with the Most Resurfacing Equity

Meanwhile, the markets with most resurfacing equity (in which properties are between negative 10 percent and positive 10 percent) are:

  1. Colorado Springs, Colo., (28%)
  2. Albuquerque N.M. (22%)
  3. Lancaster, Pa. (22%)
  4. El Paso, Texas (22%)
  5. Salt Lake City (22%)
  6. Worcester, Mass. (22%)

Source: RealtyTrac