Borrower Equity Goes Up $1 Trillion In A Year

With nearly 950,000 homes returning to positive equity in the second quarter of the year, the total number of mortgaged residential properties with equity in the U.S. is now more than 44 million, according to a report from CoreLogic.

Nationwide, borrower equity increased year over year by approximately $1 trillion in the second quarter. CoreLogic analysis indicates that approximately 5.3 million homes – or 10.7% of all residential properties with a mortgage – are still in negative equity as of the second quarter. Comparatively, the rate was 6.3 million homes – or 12.7% – for the first quarter of the year.

This compares to a negative equity share of 14.9% – or 7.2 million homes – in the second quarter of 2013, representing a year-over-year decrease in the number of homes underwater by almost 2 million (4.2%).

For the homes with negative equity, the national aggregate value of negative equity was $345.1 billion at the end of the second quarter of this year – down $38.1 billion from approximately $383.2 billion in the first quarter. On a year-over-year basis, the value of negative equity declined from $432.9 billion in the second quarter of 2013, representing a decrease of 20.3% in 12 months.

Of the 44 million residential properties with positive equity, approximately 9 million (19%) have less than 20% equity (under-equitied), and 1.3 million of those have less than 5% (near-negative equity).

"The increase in borrower equity of $1 trillion from a year earlier is evidence that things are moving solidly in the right direction," says Sam Khater, deputy chief economist for CoreLogic. "Borrower equity is important because home equity constitutes borrowers' largest investment segment and, as a result, is driving forward the rise in wealth for the typical homeowner."

Nevada had the highest percentage of mortgaged properties in negative equity at 26.3%, followed by Florida (24.3%), Arizona (19.0%), Illinois (15.4%) and Rhode Island (14.8%). These top five states combined account for 32.8% of negative equity in the country, says CoreLogic.

Texas had the highest percentage of mortgaged residential properties in an equity position at 97.3%, followed by Alaska (96.5%), Montana (96.4%), North Dakota (96.0%) and Hawaii (96.0%).

"Many homeowners across the country are seeing the equity value in their homes grow, which lifts the economy as a whole," says Anand Nallathambi, president and CEO of CoreLogic. "With more and more borrowers regaining equity, we expect homeownership to become an increasingly attractive option for many who have remained on the sidelines in the aftermath of the great recession. This should provide more opportunities for people to sell their homes, purchase a different home or refinance an existing mortgage."


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