The Three Percent Solution

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Declines in negative equity in the third quarter were concentrated in a handful of states, with Nevada, Georgia, Michigan, and Florida seeing some of the biggest improve- ments. However, those states are still experiencing higher-than-aver- age levels of underwater mortgages. The problem is worst in Nevada and Florida, which both topped the list of states with the highest nega- tive equity rates (at 25.4 percent and 23.8 percent, respectively). Furthermore, out of the nearly 45 million mortgage properties that are above water, CoreLogic estimates that 9.4 million (19 per- cent) have less than 20 percent equity, while 1.3 million (close to 3 percent) have less than 5 percent equity. These under-equitied and near- negative-equitied properties still present a challenge to the hous- ing market, as those borrowers are likely to have a difficult time refinancing or selling their home. They're also at risk of slipping back underwater should home prices see a surprise reversal. Negative Equity Rate Approaches Single Digits in Q3 2014 With about 90 percent of the nation's mortgaged properties right-side up, first-time homebuying could get a boost. T he third quarter of 2014 saw more than a quarter of a million American homes return to positive equity, leaving about one in 10 still underwater, according to CoreLogic research. By the company's latest esti- mates, an additional 273,000 U.S. homes recovered to a positive equity position in Q 3, bringing the total number of mortgaged homes with equity to approxi- mately 44.6 million—about 90 percent of all mortgaged proper- ties in the nation. As home values rise and bor- rowers continue to gain equity, CoreLogic's analysis indicates that nearly 5.1 million properties are still upside-down on their mortgage. That figure represents about 10.3 percent of all residential properties with a mortgage, compared with about 13.3 percent the year prior. "Negative equity continued to decrease in the third quarter, as did the level of homes mired in the foreclosure process. This should hopefully translate into less friction in the housing market as we move forward," said CoreLogic President and CEO Anand Nallathambi. "Better fundamentals supporting homeownership in the face of higher rents should attract more first-time homebuyers to the mar- ket this year and next." With home prices expected to appreciate about 5 percent in the next year, CoreLogic economist Sam Khater predicts the national negative equity rate should fall another 2 percentage points to roughly 8 percent—"still above average, but approaching the pre- crisis level." The bulk of home equity recovered in the last few years has been at the high end of the housing market, CoreLogic said. The company's report shows 94 percent of homes valued at more than $200,000 are in positive eq- uity, while 85 percent of homes below that threshold are in the same position. Th e M Rep o RT | 51 O R i g i NAT i O N S E R v i c i N g A NA ly T i c S S E c O N DA R y m A R k E T ANALYTICS The laTesT

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