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Dollar Volume of U.S. Negative Equity Falls $10.2 Billion in Q3 2014

Negative Equity Decreases In All But Seven States

Shu Chen    |    Property Valuation

According to the latest CoreLogic Equity Report, released today, U.S. negative equity share nationwide fell from 10.9 percent in Q2 2014 to 10.3 percent in Q3 2014, and the number of underwater borrowers decreased from 5.4 million to 5.1 million. The total dollar amount of negative equity was down $10.2 billion from Q2 2014, falling to $338 billion in Q3 2014. Quarter over quarter, all but seven states exhibited decreases in negative equity share through Q3 2014. Figure 1 illustrates the 25 states with the largest percentage-point change in negative equity share from the previous quarter. Michigan had the largest decrease, falling by 2 percentage points from Q2 2014 to Q3 2014, followed by New Mexico (-1.5 percent), New Jersey (-1.4 percent), Ohio (-1.4 percent) and Illinois (-1.3 percent).

10 CBAs With the Largest Dollar Volume of Negative Equity

10 CBAs With the Largest Dollar Volume of Negative Equity

Figure 2 shows the top 10 Core Based Statistical Areas (CBSAs) with the largest dollar volume of Negative Equity. At the metro level, Chicago, Ill. had the highest amount of total underwater dollars as of Q3 2014 at $16 billion, followed by New York, N.Y. at $16 billion and Los Angeles, Calif. at $10 billion. Of the 10 CBSAs shown in Figure 2, six have negative equity shares above the national share of 10.3 percent.

Also according to the latest CoreLogic analysis, mortgage default rates1 fell slightly in Q3 2014. Nationally, homes with positive equity had a default rate of 0.6 percent and homes with negative equity had a default rate of 3.3 percent.

Negative equity shares broken out by price tiers 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, accounted for 13.5 percent of the total negative equity dollars nationwide in Q3 2014. Negative equity share for this category was the highest at 21.3 percent, more than twice the national share of 10.3 percent. Homes valued between $100,000 and $200,000 made up almost a third of the total negative equity dollar amount with the second highest negative equity share of 13 percent. On the other end of the scale, homes valued at more than $200,000 made up 56.5 percent of the negative equity dollars nationwide and had a negative equity share of 6.1 percent..

Quarter over quarter, the number of properties that were owner-occupied and had less than 20-percent equity, thus considered under-equitied, decreased by 0.5 percent, or 40,342 homes, to the current level of 8.2 million properties in Q3 2014. Under-equitied non owner-occupied properties, similarly, fell by 1.0 percent, or 12,683 homes, quarter over quarter to the Q3 2014 level of 1.3 million homes.

[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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