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Dollar Volume of Negative Equity Increased $7 Billion from Q3 to Q4 2014

Quarter-Over-Quarter Increase Due to Seasonality

Shu Chen    |    Property Valuation

According to the latest CoreLogic Equity Report, released today, the nationwide negative equity share increased from 10.4 percent in Q3 2014 to 10.8 percent in Q4 2014, and the number of underwater borrowers (or those in negative equity) increased from 5.2 million to 5.4 million. The total dollar amount of negative equity was up $7 billion from Q3 2014, totaling $348.8 billion in Q4 2014.

Quarter over quarter, 29 states exhibited increases in the negative equity share through Q4 2014. Figure 1 illustrates the 25 states with the largest percentage-point change in the negative equity share from the previous quarter. Illinois experienced the largest increase, up by 1.8 percentage points from Q3 2014 to Q4 2014, followed by Connecticut (+1.4 percent), New Jersey (+1.4 percent) and Ohio (+1.3 percent). Nevada had the largest decrease (-1.3 percent) from the previous quarter.

10 CBAs With the Largest Dollar Volume of Negative Equity

10 CBAs With the Largest Dollar Volume of Negative Equity

Figure 2 shows the amount of negative equity for the 10 largest Core Based Statistical Areas (CBSAs) based on population with the largest dollar amount of negative equity. At the metro level, Chicago had the highest total of underwater dollars as of Q4 2014 at $17 billion, followed by New York at $16 billion and Los Angeles at $10 billion. Of the 10 CBSAs shown in Figure 2, seven have negative equity shares above the national share of 10.8 percent.

Also according to the latest CoreLogic analysis, mortgage default rates1 fell slightly in Q4 2014. Nationally, homes with positive equity had a default rate of 0.5 percent and homes with negative equity had a default rate of 3.1 percent.

Negative equity shares show stark differences when broken out by price tiers. Trends suggests 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 22 percent in Q4 2014, which is more than twice the national share of 10.8 percent. Homes valued between $100,000 and $200,000 had the second highest negative equity share of 13.6 percent. On the other end of the scale, homes valued at more than $200,000 had only a 6.4 percent negative equity share, but made up 56 percent of the negative equity dollars nationwide.

Quarter over quarter, the number of properties that were owner-occupied and had less than 20-percent equity, thus considered under-equitied, increased by 4.1 percent, or 345,239 homes, to the current level of 8.7 million properties in Q4 2014. Under-equitied non owner-occupied properties, similarly, increased by 3.6 percent, or 45,501 homes, quarter over quarter to the Q4 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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