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Negative Equity Will Continue Declining in 2014 – CoreLogic

by devteam December 17th, 2013 | Share

Negative equity amounts continued tornshrink during the third quarter of 2013 CoreLogic said today.  An estimated 791,000 properties regained an equityrnposition during the quarter, leaving about 6.4 million homes “under water.” </p

CoreLogic’s latest negative equityrnanalysis reports that about 13 percent of all mortgaged homes in the U.S.rnremain in negative territory compared to 14.7 percent or 7.2 million homes atrnthe end of the second quarter.  </p

A house is said to have negativernequity or be underwater when more is owed on the mortgage than the market valuernof the property.  Negative equity canrnoccur because of a decline in value, an increase in mortgage debt or arncombination of both. </p

The national aggregate value ofrnnegative equity was $397 billion at the end of the third quarter compared torn$430 billion at the end of the second quarter of 2013, a decrease of $33.7rnbillion. This decrease was driven in large part by an improvement in homernprices.</p

There are an estimated 42.6 millionrnhomes in the U.S. with positive equity, but 10 million or over one-fifth ofrnthem (20.4 percent) have less than 20 percent equity, what CoreLogic callsrnbeing “under-equitied.  Their owners mayrnhave difficulty refinancing because of underwriting requirements and theirrnability to buy in order to move may be similarly constrained.  More than 1.5 of these under-equitied ownersrnhave less than 5 percent or what is called near-negative equity and arernconsidered at risk should home prices fall. </p

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Nevada had the highest incidence ofrnnegative equity, 32.2 percent of all mortgaged homes, followed by Florida (28.8rnpercent), Arizona (22.5 percent), Ohio (18.0 percent) and Georgia (17.8rnpercent). These five states together accounted for 36.4 percent of negativernequity in the U.S.</p

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The 3.8 million homeowners with arnsingle mortgage on their homes accounted for $202 billion of the $397 billionrnin aggregate negative equity. Their average mortgage balance is $221,000 andrnthey are underwater by an average of $53,000. rnThe 2.5 million homeowners with both a mortgage and a home equity loan havernan average combined balance of $296,000 and are underwater by an average ofrn$77,000.  </p

The bulk of positive home equity forrnmortgaged properties is concentrated at the high end of the housing market. Forrnexample, 92 percent of homes valued at greater than $200,000 have equityrncompared with 82 percent of homes valued at less than $200,000.</p

“Rising home prices continuedrnto help homeowners regain their lost equity in the third quarter of 2013,”rnsaid Mark Fleming, chief economist for CoreLogic. “Fewer than 7 millionrnhomeowners are underwater, with a total mortgage debt of $1.6 trillion.rnNegative equity will decline even further in the coming quarters as the housingrnmarket continues to improve.”</p

“We should see a furtherrnrebound in consumer confidence and economic growth in 2014 as more homeownersrnescape the negative equity trap,” said Anand Nallathambi, president and CEOrnof CoreLogic. “Home price appreciation has helped more than 3 millionrnproperty owners regain equity since the first quarter of 2013.”

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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