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Dollar Volume of Negative Equity Decreased by $29 Billion from Q1 2015 to Q2 2015

National Negative Equity Share Fell Below 10 Percent in Q2 2015

Molly Boesel    |    Property Valuation

The nationwide negative equity share decreased from 10.2 percent in Q1 2015 to 8.7 percent in Q2 2015, and the number of underwater loans (or those in negative equity) decreased from 5.1 million to 4.4 million, according to the latest CoreLogic Equity Report. The total dollar amount of negative equity fell $28.5 billion from Q1 2015 to $309.5 billion in Q2 2015.

Quarter over quarter, 43 states exhibited decreases in the negative equity share in Q2 2015. Figure 1 illustrates the 25 states with the largest percentage-point decline in the negative equity share from the previous quarter. Illinois experienced the largest decrease, down by 3.3 percentage points from Q1 2015 to Q2 2015.

Figure 2 shows the 10 Core Based Statistical Areas (CBSAs) with the largest dollar amount of negative equity. At the metro level, New York had the highest total of underwater dollars as of Q2 2015 at $15.3 billion, followed by Chicago at $15 billion and Los Angeles at $8.6 billion. Of the 10 CBSAs shown in Figure 2, six have negative equity shares above the national share of 8.7 percent.

Also according to the latest CoreLogic analysis, mortgage default rates1 fell slightly in Q2 2015. Nationally, homes with positive equity had a default rate of 0.5 percent and homes with negative equity had a default rate of 2.7 percent.

Negative equity shares show stark differences when broken out by price tiers. Trends suggest that there is a high concentration of negative equity mortgages in the low end of the housing market. Homes valued at less than $100,000, for example, had a negative equity share of 19.1 percent in Q2 2015, which is more than twice the national share of 8.7 percent. Homes valued between $100,000 and $200,000 had the second-highest negative equity share of 11.3 percent. On the other end of the scale, homes valued at more than $200,000 had only a 5.1 percent negative equity share, but made up 58 percent of the negative equity dollars nationwide.

[1] Default rates are calculated by dividing the number of properties in a group for which a Notice of Default (NOD) has been issued by the total number of properties in the specific cohort group. The result is the default rate for the cohort.

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