Average Underwater Borrower Won’t See Positive Equity Until 2016

The typical U.S. homeowner who is in a negative-equity position will not experience positive equity until late 2015 to early 2016, according to new estimates from First American CoreLogic.

In certain markets, it will take another five to 10 years, or even longer, to return to positive equity, adds the firm, which previously reported that about 24% of all residential mortgaged properties had negative equity at the end of 2009.

In markets with low shares of negative equity, the recovery time will still be long, because the few borrowers that are upside down are deeply in negative equity, and these are typically not high-appreciation markets, First American CoreLogic says.

Although house-price appreciation will, over time, offset negative equity, amortization will, in most cases, be a more significant remedy to negative equity. Over the next 10 years, the average loan balance will decrease by an annual rate of 3.3%. Meanwhile, home prices are expected to increase at a 3% annual rate over the next decade.

Of the 10 markets the company studied, the Washington-Arlington-Alexandria Core Based Statistical Area is expected to reach positive equity by 2015; Atlanta-Sandy Springs-Marietta, Dallas-Plano-Irving and Riverside-San Bernardino-Ontario are projected for 2016; Boston-Quincy by 2017; and Cape Coral-Fort Myers, Pittsburgh, Las Vegas-Paradise and Lancaster, Pa., by 2020. It is estimated that Detroit will not reach positive equity until after 2020.

About 24% of all residential mortgaged properties were underwater at the end of last year, the company previously reported.

SOURCE: First American CoreLogic


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