By Mike Colpitts
Underwater homeowners, already upside down in the current economy more than ever before are seeing their fortunes turn around, with new data showing a gain in home equity. The upturn in homeowner equity comes as a result of growing home price inflation in some cities and slower equity losses in others.
Some 11.4-million U.S. homes with a mortgage were underwater at the end of June, according to real estate research firm CoreLogic. The improvement in homeowner equity represents a decline of 700,000 homes that showed greater equity in the second quarter compared to the first quarter of the year.
Negative equity and near underwater homeowners accounted for 28.5% of residential properties with a mortgage across the nation, CoreLogic says. Underwater homeowners dropped from $742 billion in lost equity last December to $691 billion as of the end of March. The shift represents an improving number of homeowners gaining equity, despite the record foreclosure crisis.
The five hardest hit states combined have an average underwater share of 44.5%, while the remaining states average only 15.9% in negative equity. With nearly two out of three homes underwater, Nevada had the highest negative equity percentage at 61%, followed by Florida (45%), Arizona (43%), Georgia (37%) and Michigan (35%).
However, the low end of the housing market is where the majority of negative equity is concentrated. Low to mid-range homes, valued at less than $200,000, has almost twice the amount of negative equity of homes than in higher price ranges.
“This is a meaningful improvement that is driven by quickly improving outlooks in some of the hardest hit markets,” said CoreLogic economist Mark Fleming. “While the overall stagnating economic recovery will likely slow (the) housing market recovery in the second half of this year, reducing the number of underwater households is an important step.”
Some 6.9-million mortgage borrowers of the 11.4-million underwater are without second mortgages or homeowner equity lines of credit. The group has an average mortgage balance of $212,000 and are underwater an average of $47,000.