Fewer U.S. homes ‘deeply underwater’

January 10th, 2014

As the housing recovery continues, more homes in the U.S. are seeing equity.

A recent report by RealtyTrac found that more mortgages are regaining equity.

The December 2013 U.S. Home Equity & Underwater Report showed that the number of "deeply underwater" homes – those with a combined loan amount of at least 25 percent more than the estimated market value – fell to 9.3 million, down from 10.7 million in September and the peak of 12.8 million set in May 2012. Of all mortgaged homes, 19 percent fit into the deeply underwater category, with 1 percent (239,470) in the foreclosure process and 18 percent (9 million) not in some state of foreclosure.

In September, 23 percent of all mortgaged properties were deeply underwater, and 29 percent fit into this category in May 2012. Thirty-one percent of homes in foreclosure had some equity.

"During the housing downturn we saw a downward spiral of falling home prices resulting in rising negative equity, which in turn put millions of homeowners at higher risk for foreclosure when they encountered a trigger event such as job loss," said RealtyTrac Vice President Daren Blomquist.

He also stated that price appreciation has led to the decline of negative equity, which bodes well for homeowners fearing foreclosure.

Equity grows for homeowners
In addition to improvements in the deeply underwater category, the number in the equity-rich category increased in the fourth quarter of 2013. These properties, which have at least 50 percent equity, totaled 9.1 million in December, or 18 percent of all mortgaged residential properties. In September, 7.4 million homes – 16 percent of mortgaged properties – were in the equity-rich group.

"On the other end of the spectrum, the percentage of equity-rich homeowners is nearing a tipping point that should result in a larger inventory of homes listed for sale and give the overall economy a nice shot in the arm in 2014," Blomquist said.

He noted that while more homes are climbing toward equity, there are still many mortgages that have a longer path to regaining value. Without adequate help through loan restructuring, these homes may be pushed toward foreclosure as a simpler option.

Hawaii leads the nation for equity-rich homes
The Aloha State had the highest proportion of equity-rich properties, at 36 percent of all mortgaged properties. Hawaii was followed by New York (33 percent) and California (26 percent) as well as Montana, Maine and the District of Columbia which all had 24 percent.

The major metro area with the highest proportion of equity-rich homes was San Jose, Calif., followed by San Francisco; Pittsburgh; Buffalo, N.Y.; and Los Angeles.