Want to Motivate Sellers? 850,000 Properties Bounce Back to Positive Equity

Residential property analytic provider CoreLogic® recently released new analysis showing the market is making big moves, with 850,000 additional residential properties turning to positive equity during the first quarter of 2013. In addition, the analysis shows good news for mortgages: the total number of mortgaged residential properties standing in negative equity is down by nearly 1 million from the previous quarter, moving from 10.5 million (21.7 percent) at the end of the fourth quarter of 2012, to 9.7 million (19.8 percent) in the first quarter of 2013. The national aggregate value of negative equity decreased more than $50 billion to $580 billion at the end of the first quarter from $631 billion at the end of the fourth quarter of 2012. This decrease was driven in large part by an improvement in home prices. “We are seeing an increase in homeowner equity as home prices continue to rise,” said Rei Mesa, President & CEO of Prudential Florida Realty in January’s issue of RISMedia’s Real Estate magazine. “This translates to a larger number of homeowners who are no longer underwater and can move up, or make a lateral move or downsize because they are now in a position to sell their home. With this lift in homeowner equity, we should experience a rise in traditional home sales.” Of the 39 million residential properties with positive equity, 11.2 million have less than 20 percent equity. At the end of the first quarter of 2013, 2.1 million residential properties had less than 5 percent equity, referred to as near-negative equity. Under-equitied mortgages accounted for 23 percent of all residential properties with a mortgage nationwide in the first quarter of 2013. The average amount of equity for all properties with a mortgage is 32.8 percent. “The impressive home price gains of 2012 and the beginning of 2013 have had a big impact on the distribution of residential home equity,” says Dr. Mark Fleming, chief economist for CoreLogic. “During the past year, 1.7 million borrowers have regained positive equity. We expect the pent-up supply that falling negative equity releases will moderate price gains in many of the fast-appreciating markets this spring.” “The negative equity burden continues to recede across the country thanks largely to rising home prices,” says Anand Nallathambi, president and CEO of CoreLogic. “We are still far below peak home price levels, but tight supplies in many areas coupled with continued demand for single family homes should help us close the gap.” Highlights as of Q1 2013: Nevada had the highest percentage of mortgaged properties in negative equity at 45.4 percent, followed by Florida (38.1 percent), Michigan (32 percent), Arizona (31.3 percent) and Georgia (30.5 percent). These top five states combined account for 32.8 percent of negative equity in the U.S. Of the largest 25 metropolitan areas, Tampa-St. Petersburg-Clearwater, Fla. had the highest percentage of mortgaged properties in negative equity at 44.1 percent, followed by Miami-Miami Beach-Kendall, Fla. (40.7 percent), Atlanta-Sandy Springs-Marietta, Ga. (34.5 percent), Chicago-Joliet-Naperville, Ill. (34.2 percent) and Warren-Troy-Farmington Hills, Mich. (33.6 percent). Of the total $580 billion in negative equity, first liens without home equity loans accounted for one-half, or $290 billion aggregate negative equity, while first liens with home equity loans accounted for the remaining half at $290 billion. 6.0 million upside-down borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $211,000. The average underwater amount is $48,000. 3.7 million upside-down borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $294,000.The average underwater amount is $79,000. The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 88 percent of homes valued at greater than $200,000 have equity compared with 73 percent of homes valued at less than $200,000. “As leaders and agents, it is up to us to get the word out,” said Gary Scott, President of Long & Foster Real Estate, during RISMedia’s recent Power Broker Forum at NAR Midyear. “There is a huge opportunity for people who had negative equity to come back into the market. We have to help those sellers. It’s about a grass roots effort—about taking your sphere of influence and walking them through the reality of the market.” Stay tuned to RISMedia.com for continuing coverage of the housing recovery.

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