CoreLogic Reports 2.5 Million More Residential Properties Return to Positive Equity in Second Quarter of 2013
September 10, 2013, Irvine, Calif. –
––7.1 Million Residential Properties with a Mortgage Still in Negative Equity––
CoreLogic® (NYSE: CLGX), a leading residential property information, analytics and services provider, today released new analysis showing approximately 2.5 million more residential properties returned to a state of positive equity during the second quarter of 2013, and the total number of mortgaged residential properties with equity currently stands at 41.5 million. The analysis shows that 7.1 million homes, or 14.5 percent of all residential properties with a mortgage, were still in negative equity at the end of the second quarter of 2013. This figure is down from 9.6 million homes, or 19.7 percent of all residential properties with a mortgage, at the end of the first quarter of 2013*.
Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.
The national aggregate value of negative equity was $428 billion at the end of the second quarter compared to $576 billion at the end of the first quarter of 2013, a decrease of more than $148 billion. This decrease was driven in large part by an improvement in home prices.
Of the 41.5 million residential properties with positive equity, 10.3 million have less than 20 percent equity. Borrowers with less than 20 percent equity, referred to as “under-equitied,” may have a more difficult time obtaining new financing for their homes due to underwriting constraints. Under-equitied mortgages accounted for 21.1 percent of all residential properties with a mortgage nationwide in the second quarter of 2013. At the end of the second quarter of 2013, 1.7 million residential properties had less than 5 percent equity, referred to as near-negative equity. Properties that are near negative equity are at risk should home prices fall.
“Equity rebuilding continued in the second quarter of this year as the share of underwater mortgaged homes fell to 14.5 percent,” said Dr. Mark Fleming, chief economist for CoreLogic. “In just the first half of 2013 almost three and a half million homeowners have returned to positive equity, but the pace of improvement will likely slow as price appreciation moderates in the second half.”
“Price appreciation obviously had a positive impact on home equity over the first half of 2013, especially the second quarter,” said Anand Nallathambi, president and CEO of CoreLogic. “Despite the substantial decrease in negative equity, there’s more ground left to gain with the 7.1 million U.S. residences that remain underwater.”
Highlights as of Q2 2013:
- Nevada had the highest percentage of mortgaged properties in negative equity at 36.4 percent, followed by Florida (31.5 percent), Arizona (24.7 percent), Michigan (22.5 percent), and Georgia (20.7 percent). These top five states combined account for 34.9 percent of negative equity in the U.S.
- Of the largest 25 metropolitan areas, Miami-Miami Beach-Kendall, Fla. had the highest percentage of mortgaged properties in negative equity at 36.5 percent, followed by Tampa-St. Petersburg-Clearwater, Fla. (33.8 percent), Phoenix-Mesa-Glendale, Ariz. (25.6 percent), Riverside-San Bernardino-Ontario, Calif. (24.8 percent) and Warren-Troy-Farmington Hills, Mich. (24.3 percent).
- Of the total $428 billion in negative equity, first liens without home equity loans accounted for approximately one-half, or $217 billion aggregate negative equity, while first liens with home equity loans accounted for the remaining $211 billion.
- 4.3 million upside-down borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $217,000. The average underwater amount is $51,000.
- 2.8 million upside-down borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $292,000.The average underwater amount is $75,000.
- The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 91 percent of homes valued at greater than $200,000 have equity compared with 80 percent of homes valued at less than $200,000.
*First quarter 2013 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.
The full Equity Report with additional charts is available: CoreLogic Q2 2013 Equity Report
The amount of equity for each property is determined by comparing the estimated current value of the property against the mortgage debt outstanding (MDO). If the MDO is greater than the estimated value, then the property is determined to be in a negative equity position. If the estimated value is greater than the MDO, then the property is determined to be in a positive equity position. The data is first generated at the property level and aggregated to higher levels of geography. CoreLogic data includes 49 million properties with a mortgage, which accounts for more than 85 percent of all mortgages in the U.S. CoreLogic uses its public record data as the source of the MDO which includes both first-mortgage liens and second liens and is adjusted for amortization and home equity utilization in order to capture the true level of MDO for each property. The calculations are not based on sampling, but rather on the full data set to avoid potential adverse selection due to sampling. The current value of the property is estimated using a suite of proprietary CoreLogic valuation techniques, including valuation models and the CoreLogic Home Price Index (HPI). Only data for mortgaged residential properties that have a current estimated value is included. There are several states or jurisdictions where the public record, current value or mortgage coverage is thin. These instances account for fewer than 5 percent of the total U.S. population.
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CoreLogic (NYSE: CLGX) is a leading property information, analytics and services provider in the United States and Australia. The company’s combined data from public, contributory and proprietary sources includes over 3.3 billion records spanning more than 40 years, providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, transportation and government. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and managed services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in seven countries. For more information, please visit www.corelogic.com.
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