[The number of homes in
negative equity is on the decline, according to the real estate data firm CoreLogic. In the fourth quarter of 2012, the rate of underwater homes dropped to 21.5 percent, down from the previous year’s 25.2 percent. Rising home values have lifted 1.7 million households into positive equity in the past year.
Underwater households are those which owe more on their mortgage than the home is actually worth. Currently, more than 10 million, or about one in five homes are considered “underwater.” CoreLogic predicts that home values will rise another five percent this year, lifting an additional 1.8 million out of negative equity.During the fourth quarter of last year alone, 200,000 households entered positive equity, according to
CoreLogic. “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,” said Anand Nallathambi, president and CEO of CoreLogic, in a statement. “The trend toward more homeowners moving back into positive equity territory should continue in 2013.”
Housing Market Improvements in Hardest-hit Cities
The drivers behind the reduced number of underwater homes are
improved market conditions, rising home prices, and shrinking
inventory. Economist for CoreLogic, Mark Fleming said in a statement, “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.” The states that tallied the most underwater mortgaged properties were Nevada, Florida, Arizona, Georgia, and Michigan. Of those states, two Florida cities, Tampa and Miami, had the highest share of properties in negative equity. Atlanta followed closely, along with Southwestern cities Phoenix and Riverside, Calif. In each of these metro areas, the percentage of mortgage properties underwater exceeded 35 percent.
Many of these households struggle to make monthly payments, and moving into positive equity comes as a huge relief. For some, rising home equity means they can finally
sell to break even, if not at a net gain. Matthew Oropeza told the
Wall Street Journal about his
experience owning an underwater mortgage on his Phoenix home. Oropeza purchased his home for $96,000, but as the local market tanked, he realized his home was worth only $64,000. Oropeza held onto his home as long as he could, until his employer required him to relocate to Orange County, Calif. Fortunately for Oropeza, the Phoenix home price index jumped 23 percent last year. So when he contacted his real estate agent, he realized that the market had turned and he might even make some money off the sale. Oropeza now has an offer of more than $100,000 and expects to sell his home in the coming weeks.
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