Negative Equity Drops Again, Report Finds

Second-quarter data show a second consecutive quarterly decline in national negative equity rates, CoreLogic reports. Eleven million homes, or about 23% of all residential properties with mortgages, were in negative equity at the end of the second quarter of 2010 – down from 11.2 million (24%) from the first quarter.

About two-thirds of all states experienced a decline in negative-equity share. Since peaking in the fourth quarter of 2009, the number of borrowers in a negative-equity position has declined by about 350,000.

Foreclosures, rather than meaningful price appreciation, were the primary driver in the change in negative equity, CoreLogic says. An additional 2.4 million borrowers had less than 5% negative equity. Together, negative equity and near-negative equity mortgages accounted for nearly 28% of all residential mortgaged properties.

Negative equity remains concentrated in the sand states (Nevada, Florida, Arizona and California) and Michigan. The biggest declines in negative equity were similarly concentrated in the hardest-hit states. Nevada experienced an 11.8 percentage-point decline in negative-equity share, but still had a higher percentage of underwater properties than any other state, at 68%.

The largest decrease in negative equity occurred among those with loan-to-value ratios in excess of 125%, where the number of negative-equity borrowers fell to 4.8 million – down from 5 million last quarter.

Homes with more equity are appreciating faster than underwater homes, CoreLogic adds. The average values of properties with 50% or more equity increased over 1% between the fourth quarter of 2009 and the second quarter of this year. Properties with 25% to 50% in equity increased an average of 0.2% in that period.

However, values fell for every segment in negative equity, with the biggest value decline occurring for properties that are 50% or more in negative equity.

The 11 million negative-equity properties are backed by $2.9 trillion in mortgage debt outstanding (MDO). On an MDO dollar basis, the negative equity share was 33%, and the total dollar value of negative equity was $766 billion.

SOURCE: CoreLogic


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