The number may have declined but about a quarter of homeowners are “underwater”, with 10.7 million, or 22 percent of all residential mortgage borrowers, reported to be in negative equity by the end of the third quarter of 2012, according to CoreLogic‘s just-released update.
The figure is down from 10.8 million properties, or 22.3 percent, at the end of the second quarter of 2012.
However, an additional 2.3 million borrowers had less than 5 percent equity in their home, a level referred to as near-negative equity, at the end of the third quarter. It might be time for them to consider using a equity release calculator to see if it is affordable for them?
Together, negative equity and near-negative equity mortgages accounted for 26.8 percent of all residential properties with a mortgage nationwide in the third quarter. That’s down a more impressive 27 percent compared to the end of the second quarter in 2012.
Higher home prices have helped some underwater borrowers reduce their negative equity, at least enough to rejoin the market. Those in negative equity are essentially “locked-out” of selling their homes and taking advantage of low mortgage rates to upgrade or downsize.
“Through the third quarter, the number of underwater borrowers declined significantly,” said Mark Fleming, chief economist for CoreLogic. “The substantive gain in house prices made in 2012, partly due to tight inventory caused by negative equity’s lock-out effect, has paradoxically alleviated some of the pain.”
CoreLogic also found that about 100,000 more borrowers made it to positive equity during the third quarter of 2012, adding to the more than 1.3 million borrowers that moved into positive equity through the second quarter of 2012.
That’s a total number of borrowers who moved from negative to positive equity to 1.4 million as of the end of September.
The bulk of negative equity is concentrated in the low end of the housing market. For low- to mid-value homes (less than $200,000), the negative equity share is 28.7 percent, almost twice the 14.6 percent for borrowers with home values greater than $200,000.
More highlights from CoreLogic’s Q3 2012 report:
- 6.6 million upside-down borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $214,000. The average underwater amount is $49,000.
- 4.1 million upside-down borrowers possess both first and second liens. The average mortgage balance for this group of borrowers is $298,000.The average underwater amount is $82,000.
- Nevada had the highest percentage of mortgaged properties in negative equity at 56.9 percent, followed by Florida (42.1 percent), Arizona (38.6 percent), Georgia (35.6 percent) and Michigan (32 percent). These top five states combined account for 34 percent of the total amount of negative equity in the U.S.
- Of the total $658 billion in aggregate negative equity, first liens without home equity loans accounted for $323 billion aggregate negative equity, while first liens with home equity loans accounted for $334 billion.