Thanks to rising property values, about 4 million homes returned to positive equity in 2013, bringing the total number of mortgaged residential properties with equity to 42.7 million, according to CoreLogic.
Still, nearly 6.5 million homes, or 13.3% of all residential properties with a mortgage, were in negative equity, or ‘underwater,’ at the end of the year.
Most of the 4 million properties that returned to positive equity did so during the first half of 2013. This is because home price appreciation started to slow during the third quarter.
As of the fourth quarter, the national aggregate value of negative equity was $398.4 billion, compared to $401.3 billion for the third quarter, according to CoreLogic. This represents a decrease of $2.9 billion.
Of the 42.7 million residential properties with positive equity, 10 million, or 21.1%, had less than 20% equity. CoreLogic points out that these "under-equitied" homeowners may have a more difficult time obtaining new financing due to underwriting constraints.
Another 1.6 million residential properties had less than 5% equity, known as ‘near-negative equity.’ Should home prices start to fall, these homes are at risk of returning to negative equity.
‘The plight of the underwater borrower has improved dramatically since negative equity peaked in December 2009 when more than 12 million mortgaged homeowners were underwater,’ says Mark Fleming, chief economist for CoreLogic. ‘Over the past four years, more than 5.5 million homeowners have regained equity, reducing their risk of foreclosure and unlocking pent-up supply in the housing market.’
‘Stability and growth in the housing market are essential for a durable recovery of the U.S. economy,’ adds Anand Nallathambi, president and CEO of CoreLogic. ‘The rebound in home prices in 2013 helped 4 million property owners regain at least some positive equity in their largest asset – their home. We still have a long way to go to eliminate the negative equity overhang but significant progress is being made every day across most of the country.’
States that had the highest percentage of mortgaged homes with negative equity in 2013 included Nevada (30.4%), Florida (28.1%), Arizona (21.5%), Ohio (19%) and Illinois (18.7%).
Metropolitan areas with the highest percentage of mortgaged homes with negative equity in 2013 included Orlando-Kissimmee-Sanford, Fla. (31.5%); Tampa-St. Petersburg-Clearwater, Fla. (30.4%); Phoenix-Mesa-Scottsdale, Ariz. (22.1%); Chicago-Naperville-Arlington Heights, Ill. (21.4%); and Atlanta-Sandy Springs-Roswell, Ga. (19.9%).
Of the total $398 billion in negative equity, first liens without home equity loans accounted for $205 billion aggregate negative equity, while first liens with home equity loans accounted for $193 billion.
To access the full report, click here.