The share of U.S homeowners with positive home equity continues to improve this year with thousands of properties regaining $646 billion during the second quarter alone, according to recent data from CoreLogic (NYSE: CLGX).
During the second quarter, 548,000 U.S. homeowners saw their home equity improve compared to the previous quarter, increasing the percentage of homes with positive equity to 92.9% of all mortgaged properties, or approximately 47.2 million homes.
Nationwide, the $646 billion growth represents an increase of 9.9% in the second quarter, compared to the same period a year ago.
The total number of mortgaged residential properties with negative equity stood at 3.6 million during the quarter, or 7.1% of all homes with a mortgage. This represents a decrease of 13.2% compared to the prior quarter, when 4.2 million properties were underwater, or 8.2% of all homes.
Improvement was also seen on a year-over-year basis, as the number of underwater homes in the second quarter of 2016 was 19% lower that 2Q15, when 4.5 million homes, or 8.9% of all properties, reported negative equity.
“Home-value gains have played a large part in restoring home equity,” said CoreLogic Chief Economist Dr. Frank Nothaft in a press release. “The CoreLogic Home Price Index for the U.S. recorded 5.2 percent growth in the year through June, an important reason that the number of owners with negative equity fell by 850,000 in the second quarter from a year earlier.”
Among underwater borrowers, approximately 2.2 million hold first liens without home equity loans. On average, the mortgage balance held by this group is $252,000, and the average underwater amount is $73,000.
Approximately 1.4 million of all underwater borrowers hold both first and second liens; their average monthly balance is $314,000, and the average underwater amount for this group is $88,000.
The bulk of positive equity for mortgaged residential properties was concentrated at the high end of the housing market, where 96% of homes valued at $200,000 or more reported having equity, compared to 89% of homes valued at less than $200,000.
Of the more than 50 million homes carrying a mortgage, approximately 8.6 million (17%) have less than 20% equity, which CoreLogic refers to as “under-equitied.” Meanwhile, approximately 965,000 (1.9%) are “near-negative equity” as they contain less than 5% home equity.
“Borrowers who are under-equities may have a difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints,” CoreLogic writes. “Borrowers with near-negative equity are considered at risk of shifting into negative equity if home prices fall.”
In the coming year, CoreLogic forecasts home prices will rise another 5%, based on the company’s latest projected national Home Price Index.
“Assuming this growth is uniform across the U.S., that should release an additional 700,000 homeowners from the scourge of negative equity,” said Anand Nallathambi, president and CEO of CoreLogic.
Nevada had the highest percentage of mortgaged properties in negative equity at 15.3%, according to CoreLogic’s analysis; followed by Florida (14%), Maryland (11.8%), Illinois (11.7%) and Arizona (11.6%). These top-five states combined for 33.7% of negative equity in the U.S., but only 18.6% of outstanding mortgages.
As for states with the highest share of positive equity properties, Texas led the way with 98.3% of all homes, followed by Alaska (98%), Colorado (97.8%), Hawaii (97.7%) and Utah (97.6%).
Written by Jason Oliva