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Home arrow News arrow North America arrow Negative equity figures decreasing in the US housing market

Negative equity figures decreasing in the US housing market

Tuesday, 02 April 2013
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The negative equity situation in the residential property market in the United States is improving as a new analysis shows around 200,000 more homes returned to a state of positive equity during the fourth quarter of 2012.

The data from analytics firm Core Logic reveals that the total number of properties that moved from negative to positive equity in 2012 was 1.7 million and the number of mortgaged residential properties was 38.1 million.
 
The analysis also shows that 10.4 million, or 21.5% of all residential properties with a mortgage, were still in negative equity at the end of the fourth quarter of 2012. This figure is down from 10.6 million properties, or 22% at the end of the third quarter of 2012.

Negative equity 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.

Overall the national aggregate value of negative equity decreased $42 billion to $628 billion at the end of the fourth quarter from $670 billion at the end of the third quarter in 2012. This decrease was driven in large part by an improvement in home prices, the firm pointed out.

Of the 38.1 million residential properties with positive equity, 11.3 million have less than 20% equity. Borrowers with less than 20% may have a more difficult time obtaining new financing for their homes due to underwriting constraints.

At the end of the fourth quarter of 2012 some 2.3 million residential properties had less than 5% equity which means they are at risk should home prices fall. Under equitied mortgages accounted for 23.2% of all residential properties with a mortgage nationwide in the fourth quarter of 2012. The average amount of equity for all properties with a mortgage is 31%.

‘In the fourth quarter we again saw an improvement in the equity position of households. Housing market improvements, particularly in the hardest hit states, are the catalyst for households to regain equity and become participants in 2013’s housing market,’ said Mark Fleming, chief economist for Core Logic.

Anand Nallathambi, president and chief executive officer of Core Logic said that the trend toward more home owners moving back into positive equity territory should continue in 2013.

‘The scourge of negative equity continues to recede across the country. There is certainly more to do but with fewer borrowers underwater, the fundamentals underpinning the housing market will continue to strengthen,’ he added.

The data shows that Nevada had the highest percentage of mortgaged properties in negative equity at 52.4%, followed by Florida at 40.2%, Arizona at 34.9%, Georgia at 33.8% and Michigan at 31.9%. These five states combined account for 32.7% of negative equity in the US.

Of the largest 25 metropolitan areas, Tampa-St. Petersburg-Clearwater, in Florida had the highest percentage of mortgaged properties in negative equity at 44.1%, followed by Miami-Miami Beach-Kendall, also in Florida at 40.7%, Atlanta-Sandy Springs-Marietta in Georgia at 38.1%, Phoenix-Mesa-Glendale, in Arizona at 36.6% and Riverside-San Bernardino-Ontario, in California at 35.7%.

The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 86% of homes valued at greater than $200,000 have equity compared with 72% of homes valued at less than $200,000.


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