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850,000 Properties Bounce Back to Positive Equity!

June 16, 2013

Residential property analytic provider

CoreLogic® recently released new analysis

showing the market is making big moves, with

850,000 additional residential properties turning

to positive equity during the first quarter of 2013.

In addition, the analysis shows good news for

mortgages: the total number of mortgaged

residential properties standing in negative equity

is down by nearly 1 million from the previous

quarter, moving from 10.5 million (21.7 percent)

at the end of the fourth quarter of 2012, to 9.7

million (19.8 percent) in the first quarter of 2013.

The national aggregate value of negative equity decreased more than $50 billion to $580

billion at the end of the first quarter from $631 billion at the end of the fourth quarter of 2012.

This decrease was driven in large part by an improvement in home prices.

“We are seeing an increase in homeowner equity as home prices continue to rise,” said Rei

Mesa, President & CEO of Prudential Florida Realty in January’s issue of RISMedia’s Real

Estate magazine. “This translates to a larger number of homeowners who are no longer

underwater and can move up, or make a lateral move or downsize because they are now in a

position to sell their home. With this lift in homeowner equity, we should experience a rise in

traditional home sales.” Of the 39 million residential properties with positive equity, 11.2 million have less than 20

percent equity. At the end of the first quarter of 2013, 2.1 million residential properties had

less than 5 percent equity, referred to as near-negative equity. Under-equitied mortgages

accounted for 23 percent of all residential properties with a mortgage nationwide in the first

quarter of 2013. The average amount of equity for all properties with a mortgage is 32.8


“The impressive home price gains of 2012 and the beginning of 2013 have had a big impact

on the distribution of residential home equity,” says Dr. Mark Fleming, chief economist for

CoreLogic. “During the past year, 1.7 million borrowers have regained positive equity. We

expect the pent-up supply that falling negative equity releases will moderate price gains in

many of the fast-appreciating markets this spring.”

“The negative equity burden continues to recede across the country thanks largely to rising

home prices,” says Anand Nallathambi, president and CEO of CoreLogic. “We are still far

below peak home price levels, but tight supplies in many areas coupled with continued

demand for single family homes should help us close the gap.” Highlights as of Q1 2013:

Nevada had the highest percentage of mortgaged properties in negative equity at 45.4 percent,

followed by Florida (38.1 percent), Michigan (32 percent), Arizona (31.3 percent) and Georgia (30.5

percent). These top five states combined account for 32.8 percent of negative equity in the U.S.

Of the largest 25 metropolitan areas, Tampa-St. Petersburg-Clearwater, Fla. had the highest

percentage of mortgaged properties in negative equity at 44.1 percent, followed by Miami-Miami

Beach-Kendall, Fla. (40.7 percent), Atlanta-Sandy Springs-Marietta, Ga. (34.5 percent), Chicago-

Joliet-Naperville, Ill. (34.2 percent) and Warren-Troy-Farmington Hills, Mich. (33.6 percent).

Of the total $580 billion in negative equity, first liens without home equity loans accounted for onehalf,

or $290 billion aggregate negative equity, while first liens with home equity loans accounted for

the remaining half at $290 billion.

6.0 million upside-down borrowers hold first liens without home equity loans. The average mortgage

balance for this group of borrowers is $211,000. The average underwater amount is $48,000.

3.7 million upside-down borrowers hold both first and second liens. The average mortgage balance

for this group of borrowers is $294,000.The average underwater amount is $79,000.

The bulk of home equity for mortgaged properties is concentrated at the high end of the housing

market. For example, 88 percent of homes valued at greater than $200,000 have equity compared

with 73 percent of homes valued at less than $200,000. “As leaders and agents, it is up to us to get the word out,” said Gary Scott, President of Long

& Foster Real Estate, during RISMedia’s recent Power Broker Forum at NAR Midyear. “There

is a huge opportunity for people who had negative equity to come back into the market. We

have to help those sellers. It’s about a grass roots effort—about taking your sphere of

influence and walking them through the reality of the market.”

Posted by Sigrid Cottrell
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