9.1 Million U.S. Residential Properties Seriously Underwater in First Quarter, Lowest Level in Two Years

17 Percent of U.S. Properties Seriously Underwater, Down From 26 Percent Year Ago
9.9 Million Properties With 50 Percent Equity or More, Up From 9.1 Million in Q4 2013
35 Percent of Residential Properties in Foreclosure Process With Positive Equity

IRVINE, Calif. — April 17, 2014 — RealtyTrac® (www.realtytrac.com),
the nation’s leading source for comprehensive housing data, today
released its U.S. Home Equity & Underwater Report for the first
quarter of 2014, which shows that 9.1 million U.S. residential
properties were seriously underwater — where the combined loan amount
secured by the property is at least 25 percent higher than the
property’s estimated market value — representing 17 percent of all
properties with a mortgage in the first quarter.

The first quarter negative equity numbers were down to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012.
In the fourth quarter of 2013, 9.3 million residential properties
representing 19 percent of all properties with a mortgage were seriously
underwater, and in the first quarter of 2013 10.9 million residential
properties representing 26 percent of all properties with a mortgage
were seriously underwater. The recent peak in negative equity was the
second quarter of 2012, when 12.8 million U.S. residential properties
representing 29 percent of all properties with a mortgage were seriously
underwater.

The universe of equity-rich properties —
those with at least 50 percent equity — grew to 9.9 million representing
19 percent of all properties with a mortgage in the first quarter, up
from 9.1 million representing 18 percent of all properties with a
mortgage in the fourth quarter of 2013.

Another 8.5
million properties were on the verge of resurfacing in the first
quarter, with between 10 percent negative equity and 10 percent positive
equity. This segment represented 16 percent of all properties with a
mortgage in the first quarter. That was compared to 8.3 million
properties representing 17 percent of all properties with a mortgage in
the fourth quarter of 2013.

Fewer distressed
properties had negative equity in the first quarter, with 45 percent of
all properties in the foreclosure process seriously underwater — down
from 48 percent in the fourth quarter of 2013 and down from 58 percent
in the first quarter of 2013. Conversely, the share of foreclosures with
positive equity increased to 35 percent in the first quarter, up from
31 percent in the fourth quarter and up from 24 percent in the third
quarter of 2013.

“U.S. homeowners are continuing to
recover equity lost during the Great Recession, but the pace of that
recovering equity slowed in the first quarter, corresponding to slowing
home price appreciation,” said Daren Blomquist, vice president at
RealtyTrac. “Slower price appreciation means the 9 million homeowners
seriously underwater could still have a long road back to positive
equity.

“The relatively high percentage of
foreclosures with equity is surprising to many because it would seem
homeowners with equity could easily avoid foreclosure by leveraging that
equity by refinancing or with an equity sale of the home,” Blomquist
noted. “But many distressed homeowners with equity may not realize they
have equity and in some cases have vacated the property already,
assuming that foreclosure is inevitable.”

“Underwater
properties have become an insignificant part of the housing market in
Orange County,” said Chris Pollinger, senior vice president of sales at
First Team Real
Estate
, covering the Southern California market.
“Out of the nearly 40,000 properties we currently have listed only about
3,000 of those are distressed or short sale properties, proving that
the continual rise in home prices is relieving the housing market of
underwater homeowners.”

 

Markets with most
negative equity

States with the highest
percentage of residential properties seriously underwater in the first
quarter were Nevada (34 percent), Florida (31 percent), Illinois (30
percent), Michigan (29 percent), and Ohio (27
percent).

Major metropolitan statistical areas
(population 500,000 or more) with the highest percentage of residential
properties seriously underwater were Las Vegas (37 percent), Lakeland,
Fla., (36 percent), Palm Bay-Melbourne-Titusville, Fla., (35 percent),
Cleveland (35 percent), Akron, Ohio (34 percent), and Detroit (33
percent).

Markets with most resurfacing
equity

Major metro areas with the highest
percentage of resurfacing equity — between negative 10 percent and
positive 10 percent — were Louisville, Ky., (37 percent), Columbia, S.C.
(28 percent), Colorado Springs, Colo., (28 percent), Little Rock, Ark.,
(28 percent), and Tulsa, Okla., (27
percent).

“Homeowners are no longer underwater on
their homes like they were at the peak of 2012,” said Sheldon Detrick,
CEO of Prudential
Detrick/Alliance Realty
, covering the Oklahoma City and Tulsa,
Okla., markets.  “Low housing inventory and more buyers are
causing home prices to rise and sell over list price, giving homeowners
who are moderately underwater a chance to avoid the foreclosure
process.”

Markets with most equity-rich
properties

Major metro areas with the highest
percentage of equity rich properties — those with at least 50 percent
equity — were San Jose, Calif., (39 percent), Honolulu (35 percent), San
Francisco (35 percent), Poughkeepsie, N.Y., (34 percent), and Los
Angeles (32 percent).

Markets with most
positive-equity foreclosures

Major metro areas
with more than 50 percent of properties in foreclosure with equity
included Denver (64 percent), Boston (58 percent), Minneapolis (58
percent), Houston (54 percent), and Washington, D.C. (52
percent).

“Home prices continue to rise due to
record-low inventory levels.  Our median closing price is now
up to $313,846, which is substantially higher than it was a year ago, so
there is no question that there are significantly fewer people who are
underwater on their homes,” said Phil Shell, a managing broker at RE/MAX Alliance,
covering the Denver, Colo. market.

“The
short sale market really dried up about nine months ago, but we do still
see some short sale transactions with higher-priced homes in the
$700,000 to $800,000 plus range,” added Heidi Greer, also a managing
broker at RE/MAX Alliance.

Report methodology
The
RealtyTrac U.S. Home Equity & Underwater report provides counts
of residential properties based on several categories of equity — or
loan to value (LTV) — at the state, metro and county level, along with
the percentage of total residential properties with a mortgage that each
equity category represents. The equity/LTV calculation is derived from a
combination of record-level open loan data and record-level estimated
property value data, and is also matched against record-level
foreclosure data to determine foreclosure status for each equity/LTV
category.

Definitions
Deeply
underwater: L
oan to value ratio of 125 percent or above,
meaning the homeowner owed at least 25 percent more than the estimated
market value of the property.

Equity Rich:
Loan to value ratio of 50 percent or lower, meaning the
homeowner had at least 50 percent
equity.

Foreclosures w/Equity:
Properties in some stage of the foreclosure process (default
or scheduled for auction, not including bank-owned) where the loan to
value ratio was 100 percent or
lower.

Report
License

The RealtyTrac U.S.
Foreclosure Market Report is the result of a proprietary evaluation of
information compiled by RealtyTrac; the report and any of the
information in whole or in part can only be quoted, copied, published,
re-published, distributed and/or re-distributed or used in any manner if
the user specifically references RealtyTrac as the source for said
report and/or any of the information set forth within the
report.

Data
Licensing and Custom Report
Order

Investors, businesses and
government institutions can contact RealtyTrac to license bulk
foreclosure and neighborhood data or purchase customized reports. For
more information contact our Data Licensing Department at 800.462.5193800.462.5193
or datasales@realtytrac.com.

About
RealtyTrac Inc.

RealtyTrac is a leading
supplier of U.S. real estate data, with nationwide parcel-level records
for more than 125 million U.S. parcels that include property
characteristics, tax assessor data, sales and mortgage deed records,
Automated Valuation Models (AVMs) and 20 million active and historical
default, foreclosure
auction and bank-owned
properties. RealtyTrac’s housing data and foreclosure
reports
are relied on by the Federal Reserve, U.S. Treasury
Department, HUD, numerous state housing and banking departments,
investment funds as well as millions of real estate professionals and
consumers, to help evaluate housing trends and make informed decisions
about real estate.

Media
Contacts:

Jennifer von
Pohlmann
949.502.8300949.502.8300,
ext. 139
jennifer.vonpohlmann@realtytrac.com

Ginny
Walker
949.502.8300949.502.8300,
ext. 268
ginny.walker@realtytrac.com

Data and Report
Licensing:

800.462.5193800.462.5193
datasales@realtytrac.com

 

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