The national volume of negative equity dropped $33.7 billion during the third quarter of 2013, a decrease driven primarily by improvements in home prices, according to the latest CoreLogic 2013 Equity Report.
During the third quarter, the national aggregate value of negative equity was $397 billion, a decrease from the previous quarter’s value of $430 billion.
CoreLogic’s analysis indicates that nearly 6.4 million homes, or 13% of all mortgaged properties, were in a state of negative equity by the end of the third quarter of 2013—a decline from the 7.2 million homes, or 14.7%, that had negative equity at the end of the second quarter.
This improvement has been influenced largely by home price appreciation, which CoreLogic notes has enabled approximately 791,000 homeowners to return to a state of positive equity during the third quarter.
The total number of residential properties with equity stands at 42.6 million.
“Rising home prices continued to help homeowners regain their lost equity in the third quarter of 2013,” said Dr. Mark Fleming, chief economist for CoreLogic. “Fewer than 7 million homeowners are underwater, with a total mortgage debt of $1.6 trillion. Negative equity will decline even further in the coming quarters as the housing market continues to improve.”
States with the highest percentages of mortgaged properties in negative equity were Nevada (32.2%), Florida (28.8%), Arizona (22.5%), Ohio (18%) and Georgia (17.8%).
In total, these five states accounted for 36.4% of negative equity in the U.S.
Florida was also home to the top-2 largest metropolitan areas that had the highest percentage of underwater mortgages, with Orlando-Kissimmee-Sanford leading the pack at 32.3%. The metro was closely followed by the Tampa-St. Petersburg-Clearwater area (30.1%).
Many of these underwater metros could be saved if home prices rise, as CoreLogic notes that even an additional 5% hike in home values nationwide could lead to 1.2 million homes regaining positive equity.
“We should see a further rebound in consumer confidence and economic growth in 2014 as more homeowners escape the negative equity trap,” said Anand Nallathambi, president and CEO of CoreLogic. “Home price appreciation has helped more than 3 million proprietary owners regain equity since the first quarter of 2013.”
Written by Jason Oliva