CoreLogic: 850K Borrowers Rise Out of Negative Equity in Q1

CoreLogic: 850K Borrowers Rise Out of Negative Equity in Q1

06/12/2013 BY: ESTHER CHO

Significant improvements in home values helped lift 850,000 borrowers out of negative equity in the first quarter, CoreLogic reported.

“The impressive home price gains of 2012 and the beginning of 2013 have had a big impact on the distribution of residential home equity,” said Dr. Mark Fleming, chief economist for CoreLogic. “During the past year, 1.7 million borrowers have regained positive equity.”

Overall, 9.7 million borrowers, or 19.8 percent of all residential mortgages, were underwater in the first quarter of 2013, down from 10.5 million, or 21.7 percent of all mortgages, in the previous quarter, according to the data provider’s estimate.

As more homeowners are freed from negative equity, prices might also stabilize in certain markets.

“We expect the pent-up supply that falling negative equity releases will moderate price gains in many of the fast-appreciating markets this spring,” Fleming added.

As an aggregate value, negative equity fell by more than $50 billion to $580 billion over the last quarter.

While 850,000 returned to positive equity in Q1, 2.1 million residential properties are at risk of transitioning into negative equity if home prices were to fall since they have less than 5 percent of equity in their homes. Another 11.2 million burrowers have less than 20 percent of equity compared to the average amount of 32.8 percent for all mortgaged properties.

The state with the highest share of upside down borrowers was Nevada, where 45.4 percent of residential mortgages are underwater.

Other states in the top five included Florida (38.1 percent), Michigan (32 percent), Arizona (31.3 percent), and Georgia (30.5 percent). According to CoreLogic, the five states alone account for 32.8 percent of all negative equity in the nation.

Out of the 9.7 million underwater borrowers, 3.7 million hold first and second liens and are underwater by an average of $79,000.

 

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