IRVINE, Calif.—A new analysis shows 268,000 homeowners regained equity in Q1 2016, bringing the total number of mortgaged residential properties with equity at the end of Q1 2016 to approximately 46.7 million, or 92% of all mortgaged properties.
CoreLogic reported that nationwide, home equity increased year over year by $762 billion in Q1 2016.
The total number of mortgaged residential properties with negative equity stood at four million, or 8 % of all homes with a mortgage, in Q1 2016. This is a decrease of 6.2% quarter over quarter from 4.3 million homes, or 8.5%, in Q4 2015, and a decrease of 21.5% year over year from 5.1 million homes, or 10.3%, compared with Q1 2015.
For the homes in negative equity status, the national aggregate value of negative equity was $299.5 billion at the end of Q1 2016, falling approximately $11.8 billion, or 3.8%, from $311.3 billion in Q4 2015, according to CoreLogic. On a year-over-year basis, the value of negative equity declined overall from $340 billion in Q1 2015, representing a decrease of 11.8% in 12 months.
Of the more than 50 million homes with a mortgage, CoreLogic reported approximately 9.1 million, or 18%, have less than 20% equity (referred to as “under-equitied”) and 1.1 million, or 2.2%, have less than 5% equity (referred to as near-negative equity). Borrowers who are under-equitied may have a difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints. Borrowers with near-negative equity are considered at risk of moving into negative equity if home prices fall.
“In just the last four years, equity for homeowners with a mortgage has nearly doubled to $6.9 trillion,” said Frank Nothaft, chief economist for CoreLogic. “The rapid increase in home equity reflects the improvement in home prices, dwindling distressed borrowers and increased principal repayment. These are all positive factors that will provide support to both household balance sheets and the overall economy.”
“More than one-million homeowners have escaped the negative equity trap over the past year. We expect this positive trend to continue over the balance of 2016 and into next year as home prices continue to rise,” said Anand Nallathambi, president and CEO of CoreLogic. “Nationally, the CoreLogic Home Price Index was up 5.5% year over year through the first quarter. If home values rise another 5% uniformly across the U.S., the number of underwater borrowers will fall by another one million during the next year.”
Among other findings as of Q1 2016:
- Nevada had the highest percentage of homes in negative equity at 17.5%, followed by Florida (15%), Illinois (14.4%), Rhode Island (13.3%) and Maryland (12.9%). Combined, these top five states account for 30.2% of negative equity in the U.S., but only 16.5% of outstanding mortgages.
- Texas had the highest percentage of homes with positive equity at 98.1%, followed by Alaska (97.8%), Hawaii (97.8%), Colorado (97.5%) and Washington (97.2%).
- Of the 10 largest metropolitan areas by population, Las Vegas-Henderson-Paradise, Nev., had the highest percentage of homes in negative equity at 19.9%, followed by Miami-Miami Beach-Kendall, Fla. (19.6%), Chicago-Naperville-Arlington Heights, Ill.. (16.7%), Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V. (10.9%) and New York-Jersey City-White Plains, N.Y.-N.J. (6%).
- Of the same 10 largest metropolitan areas, San Francisco-Redwood City-South San Francisco, Calif., had the highest percentage of homes in a positive equity position at 99.4%, followed by Houston-The Woodlands-Sugar Land, Texas (98.3%), Denver-Aurora-Lakewood, Colo. (98.3%), Los Angeles-Long Beach-Glendale, Calif. (96.1%) and Boston, MA (94.3%).
- Of the total $299.5 billion in negative equity nationally, first liens without home equity loans accounted for $166 billion, or 55%, in aggregate negative equity, while first liens with home equity loans accounted for $134 billion, or 54%.
- Among underwater borrowers, approximately 2.4 million hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $244,000 and the average underwater amount is $68,000.
- Approximately 1.6 million of all underwater borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $307,000 and the average underwater amount is $84,000.
- The bulk of positive equity for mortgaged residential properties is concentrated at the high end of the housing market. For example, 95% of homes valued at $200,000 or more have equity compared with 87% of homes valued at less than $200,000.