CoreLogic Reports Equity Improves in Fourth Quarter

Negative equity declined to 21.5 percent. 200,000 fewer properties underwater compared with third quarter 2012.

Palm Coast, FL – March 19, 2013 – CoreLogic reports today that home equity improved in the fourth quarter. Negative equity declined to 21.5 percent. 200,000 fewer properties underwater compared with third quarter 2012.
  • Rising home prices lead to improvements in home equity, with 1.7 millioin residential properties regaining equity in 2012. The number of mortgaged residential properties with equity is now at 38.1 million.
  • An additional 1.8 million properties would regain equity if home prices rose by another 5 percent.
  • 11.3 million, or 23.2 percent, of properties with a mortgage have positive equity, but are considered under-equitied, with less than 20 percent equity.
A new analysis by CoreLogic shows approximately 200,000 more residential properties returned to a state of positive equity during the fourth quarter of 2012.This brings the total number of properties that moved from negative to positive equity in 2012 to 1.7 million and the number of mortgaged residential properties with equity to 38.1 million. The analysis also shows that 10.4 million, or 21.5 percent of all residential properties with a mortgage, were still in negative equity at the end of the fourth quarter of 2012. This figure is down from 10.6 million* properties, or 22 percent, at the end of the third quarter of 2012.
The national aggregate value of negative equity decreased $42 billion to $628 billion at the end of the fourth quarter from $670 billion at the end of the third quarter in 2012. This decrease was driven in large part by an improvement in home prices.
Of the properties in negative equity, 1.8 million, or 3.7 percent of all residential properties with a mortgage, had current estimated loan-to-value (LTV) ratios between 100 and 105, referred to as near-equity. If home prices were to rise another 5 percent, these properties would move into a positive equity position. Additionally, there were 4.4 million residential properties or 9.1 percent with current LTVs of 125 percent or more. Higher amounts of negative equity are correlated with higher default rates,
Of the 38.1 million residential properties with positive equity, 11.3 million have less than 20 percent equity. Borrowers with less than 20 percent equity, referred to as “under-equitied,” may have a more difficult time obtaining new financing for their homes due to underwriting constraints. At the end of the fourth quarter, 2.3 million residential properties had less than 5 percent equity, referred to as near-negative equity. Properties that are near negative equity are at risk should home prices fall. Under-equitied mortgages accounted for 23.2 percent of all residential properties with a mortgage nationwide in the fourth quarter of 2012. The average amount of equity for all properties with a mortgage is 31 percent.
“In the fourth quarter we again saw an improvement in the equity position of households,” said Mark Fleming, chief economist for CoreLogic. “Housing market improvements, particularly in the hardest hit states, are the catalyst for households to regain equity and become participants in 2013’s housing market.”
“The scourge of negative equity continues to recede across the country. There is certainly more to do but with fewer borrowers underwater, the fundamentals underpinning the housing market will continue to strengthen,” said Anand Nallathambi, president and CEO of CoreLogic. “The trend toward more homeowners moving back into positive equity territory should continue in 2013.”
Data Highlights as of Q4 2012:
  • The bulk of home equity for mortgaged properties is concentrated in the high end of the housing market. For example, 86 percent of homes valued at greater than $200,000 have equity compared with 72 percent of homes valued at less than $200,000.
  • Of the total $628 billion in negative equity, first liens without home equity loans accounted for $313 billion aggregate negative equity, while first liens with home equity loans accounted for $315 billion.
  • 6.5 million negative equity borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $213,000. The average underwater amount is $45,000.
  • 3.9 million negative equity borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $296,000.The average underwater amount is $80,000.
  • North Dakota had the highest percent of mortgaged residential properties in a positive equity position at 94.4 percent, followed by Montana (92.8 percent), Maine (92.1 percent), New York (91.7 percent), and Alaska (91.6 percent).
  • Of the largest 25 metropolitan areas, Nassau-Suffolk, N.Y., had the highest percent of mortgaged residential properties in a positive equity position at 90.1 percent, followed by Houston-Sugar Land, Baytown, Texas (90.0 percent), Dallas-Plano-Irving, Texas (89.6 percent), Philadelphia, Pa. (89.4 percent), and New York-White Plains-Wayne, N.Y.-N.J. (88.1 percent)
  • Nevada had the highest percentage of mortgaged properties in negative equity at 52.4 percent, followed by Florida (40.2 percent), Arizona (34.9 percent), Georgia (33.8 percent) and Michigan (31.9 percent). These top five states combined account for 32.7 percent of the total amount of negative equity in the U.S.
  • Of the largest 25 metropolitan areas, Tampa-St. Petersburg-Clearwater, Fla. had the highest percentage of mortgaged properties in negative equity at 44.1 percent, followed by Miami-Miami Beach-Kendall, Fla. (40.7 percent), Atlanta-Sandy Springs-Marietta, Ga. (38.1 percent), Phoenix-Mesa-Glendale, Ariz. (36.6 percent) and Riverside-San Bernardino-Ontario, Calif. (35.7 percent).
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