Despite the fact that property values have, on average, increased more than 12% compared to this time last year, about 6.4 million residential properties – or about 13% of all residential properties with a mortgage – were still in negative equity at the end of the third quarter, according to CoreLogic's Equity Report.
This figure is down from 7.2 million homes, or 14.7% of all residential properties with a mortgage, at the end of the second quarter.
About 791,000 residential properties returned to a state of positive equity during the third quarter, bringing the total number of mortgaged residential properties with positive equity in the U.S. to 42.6 million, the report states.
The national aggregate value of negative equity was $397 billion at the end of the third quarter compared to $430 billion at the end of the second quarter – a decrease of $33.7 billion. This decrease was driven in large part by an improvement in home prices, the report states.
Of the 42.6 million residential properties with positive equity, about 10 million – or about 20.4% – have less than 20% equity, according to the report. Borrowers with less than 20% equity, referred to as "under-equitied," may have a more difficult time obtaining new financing for their homes due to underwriting constraints.
Slightly more than 1.5 million residential properties have less than 5% equity, according to the report. These ‘near-negative’ equity properties are considered at-risk should home prices fall, CoreLogic notes.
‘Rising home prices continued to help homeowners regain their lost equity in the third quarter of 2013,’ says Mark Fleming, chief economist for CoreLogic. ‘Fewer than 7 million homeowners are underwater, with a total mortgage debt of $1.6 trillion. Negative equity will decline even further in the coming quarters as the housing market continues to improve.’
States with the highest percentage of mortgaged properties in negative equity in the third quarter included Nevada (32.2%), Florida (28.8%), Arizona (22.5%), Ohio (18%) and Georgia (17.8%). These top five states combined accounted for 36.4% of negative equity in the U.S., according to CoreLogic.
Metropolitan areas with the highest percentage of mortgaged properties in negative equity in the third quarter included Orlando-Kissimmee-Sanford, Fla. (32.3%); Tampa-St. Petersburg-Clearwater, Fla. (30.1%); Phoenix-Mesa-Scottsdale, Ariz. (23.2%); Riverside-San Bernardino-Ontario, Calif. (20.8%); and Chicago-Naperville-Arlington Heights, Ill. (20.5%).
To download a copy of the report, click here.