CoreLogic Reports 850,000 More Residential Properties Return to Positive Equity in First Quarter of 2013
June 12, 2013, Irvine, Calif. –
––9.7 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 850,000 more residential properties returned to a state of positive equity during the first quarter of 2013, and the total number of mortgaged residential properties with equity currently stands at 39 million. The analysis shows that 9.7 million, or 19.8 percent of all residential properties with a mortgage, were still in negative equity at the end of the first quarter of 2013 with a total value of $580 billion. This figure is down from 10.5 million*, or 21.7 percent of all residential properties with a mortgage, at the end of the fourth quarter of 2012.
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 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.
Of the 39 million residential properties with positive equity, 11.2 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. 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. Properties that are near negative equity are at risk should home prices fall. 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 percent.
“The impressive home price gains of 2012 and the beginning of 2013 have had a big impact on the distribution of residential home equity,” said 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,” said 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 41.1 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 one-half, 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.
*Fourth quarter 2012 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 Q1 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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