With home prices rebounding robustly over the past two years, millions of mortgage borrowers have managed to regain lost equity since the housing bubble burst.
But borrowers with less than 20-percent home equity — referred to as under-equitied — still represent a substantial portion of the market. That’s nearly 1 in every 5 households with a mortgage.
Of the 44.6 million properties with a mortgage currently with equity, about 9.4 million, or 19 percent, have less than 20-percent equity, according to CoreLogic‘s most recent update based on third-quarter 2014 data.
CoreLogic analysis indicates that about 5.1 million homes, or 10.3 percent of all residential properties with a mortgage, were still in negative equity at the end of the third quarter of 2014.
Negative equity is when a borrower owes more on a home than it is worth. These properties may be referred to as underwater or upside down.
At the end of the third quarter, 1.3 million U.S. homes, or 2.6 percent, had less than 5 percent equity.
“Nationally, the negative equity share is down over three percentage points over the past year,” said Sam Khater, deputy chief economist for CoreLogic. “Declines were concentrated in a handful of states, such as Nevada, Georgia, Michigan and Florida. Forecasted house price appreciation of about five percent over the next year suggests that negative equity should be at about 8 percent a year from now, still above average, but approaching the pre-crisis level.”
The average loan-to-value ratio for all mortgaged homes is 58.9 percent.
Of residential properties with a mortgage, 1 million, or 2 percent, have a loan-to-value ratio of100 percent to 105 percent. Another 1.9 million, or 3.9 percent, have a loan-to-value ratio greater than125 percent.
About 3 million borrowers in negative equity hold first liens, but no home equity loans, CoreLogic reports.
With an average balance of $230,000, these borrowers are underwater $58,000 on average. An additional 2.1 million upside-down borrowers hold both first and second liens. The average balance for this group is $299,000.
Their average underwater amount is $78,000.