CoreLogic released new data last week showing a decline in national negative equity rates for the second consecutive quarter. Approximately 11 million (23 percent) of all residential properties with mortgages were in negative equity at the end of the second quarter. This is down from 11.2 million (24 percent) in the first quarter. There is an additional 2.4 million borrowers with less than five percent negative equity as well. However, CoreLogic points out that foreclosures, not meaningful price appreciation, are the main stimulant in this decline.
Negative and near-negative equity mortgages accounted for almost 28 percent of all residential properties with a mortgage across America. Five states remain the most concentrated with negative equity, including Nevada with 68 percent of mortgages underwater, followed by Arizona (50 percent), Florida (46 percent), Michigan (38 percent), and California (33 percent).
Roughly two-thirds of all states in America experienced a decline in negative equity share, especially during the peak in the last quarter of 2009, when the number of borrowers with negative equity dropped by nearly 350,000.
Now, the decline has been most dramatic in the five states with the worst negative equity rates – Nevada had an 11.8 percentage point decline in negative equity share, California dropped 1.3 percent, Florida dropped 1.3 percent, and Arizona dropped 1.3 percent. However, again CoreLogic points out that these declines are not due to stabilization or small increases in prices in some markets, but instead is mostly due to foreclosures.
The study also found that the largest decrease in negative equity occurred among those with loan-to-loan value (LTV) ratios in excess of 125 percent, where the number of negative equity borrowers fell to 4.8 million, which dropped from five million last quarter.
To read the entire report, see here.
Written by Kelly Mellott