11.5 Percent of Properties with Mortgage Are Underwater, Down From Peak of 28.6 Percent;
Number of Equity Rich Properties Increases 1.3 Million in 2015 to 12.6 Million;
Half of All U.S. Properties in Foreclosure Have Some Equity
IRVINE, Calif. — Jan. 28 , 2016 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its Year-End 2015 U.S. Home Equity & Underwater Report, which shows that as of the end of 2015 there were 6.4 million (6,436,381) U.S. properties 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 11.5 percent of all properties with a mortgage.
The report is based on publicly recorded mortgage and deed of trust data collected and licensed by RealtyTrac nationwide along with an industry standard automated valuation model (AVM) updated monthly on RealtyTrac’s entire database of more than 140 million U.S. properties (see full methodology below).
The year-end 2015 seriously underwater properties were down 481,292 from 6.9 million (6,917,673) representing 12.7 percent of all properties with a mortgage at the end of the third quarter of 2015 and down 616,189 from 7.1 million (7,052,570) representing 12.7 percent of all properties with a mortgage at the end of 2014. The number of seriously underwater properties at the end of 2015 was half the 12.8 million (12,824,279) representing 28.6 percent of all properties with a mortgage in Q2 2012, the peak for seriously underwater properties.
“Over the past three and a half years, the number of seriously underwater properties has been cut in half, but we continue to deal with a long tail of seriously underwater properties, and it will likely be another five years at least before most of those remaining underwater properties move into positive equity territory,” said Daren Blomquist, vice president at RealtyTrac. “At the other end of the spectrum, the growing number of equity rich properties reflects a moribund move-up market and restrained leveraging of home equity by U.S. homeowners.”
As of the end of 2015 there were 12.6 million (12,621,274) U.S. properties that were equity rich (at least 50 percent equity), representing 22.5 percent of all properties with a mortgage. The number of equity rich properties at the end of 2015 was up 2.1 million (2,145,015) from the 10.5 million (10,476,259) representing 19.2 percent of all properties with a mortgage at the end of Q3 2015 and up 1.4 million (1,371,628) from the 11.2 million (11,249,646) representing 20.3 percent of all properties with a mortgage at the end of 2014.
“The equity in South Florida homeownership continues to grow with our rising prices,” said Mike Pappas , CEO and president of Keyes Company, covering the South Florida market. “We have tipped the scale — now with more homes in strong equity positions — than underwater homeowners. Distressed homeowners who are underwater still have options — working through a short sale — usually receiving some cash for moving or utilizing the advantageous HARP refinancing vehicle. ”
Markets with the highest and lowest share of seriously underwater properties
Among metropolitan statistical areas with a population of at least 500,000, those with the highest share of seriously underwater properties as of the end of 2015 were Las Vegas, Nevada (27.7 percent), Lakeland, Florida (24.4 percent), Cleveland (24.2 percent), Akron, Ohio (22.5 percent), and Orlando, Florida (22.2 percent).
Markets with the lowest share of properties seriously underwater as of the end of 2015 were San Jose, California (1.8 percent), San Francisco (3.8 percent), Austin, Texas (3.9 percent), Portland, Oregon (4.2 percent), and Boston, Massachusetts (4.2 percent).
“I’m very pleased to see the continued drop in Seattle homeowners who are seriously underwater, which is further indication that we’ve climbed out of the hole we found ourselves in following the crash of the market in 2008,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. As of the end of 2015, 6.3 percent of homes with a mortgage in the Seattle metro area were seriously underwater, down from 8.9 percent a year ago, according to the report. “Seattle housing is benefitting greatly from positive job growth, favorable borrowing costs, and strong appreciation; therefore, I expect to see more and more homeowners return to positive equity in the coming year. My hope is that this leads to additional inventory which we desperately need in the Seattle housing market.”
Markets with the highest and lowest share of equity rich properties
Among metropolitan statistical areas with a population of at least 500,000, those with the highest share of equity rich properties as of the end of 2015 were San Jose, California (53.7 percent), San Francisco (47.6 percent), Honolulu, Hawaii (36.7 percent), Los Angeles (35.8 percent), and Pittsburgh, Pennsylvania (35.0 percent).
Markets with the lowest share of equity rich properties as of the end of 2015 were Memphis, Tennessee (11.4 percent), Dayton, Ohio (12.1 percent), Indianapolis, Indiana (12.4 percent), Las Vegas, Nevada (13.1 percent), and Cleveland, Ohio (13.3 percent).
Half of all properties in foreclosure now have some equity, a new high
As of the end of 2015, 49.7 percent of all homes in foreclosure had some equity, the highest percentage since RealtyTrac began tracking in Q3 2013. The share of in-foreclosure properties with equity at the end of 2015 was up from 43.3 percent as of the end of Q3 2015 and up from 34.6 percent as of the end of 2014.
“The increase in equity in 2015 was the enabling factor in assisting some less fortunate homeowners — such as those troubled by divorce, health, or job loss events — the ability to avoid foreclosure by taking advantage of market conditions in the sale or refinance of their properties,” said Michael Mahon, president at HER Realtors, covering the Cincinnati, Dayton and Columbus markets in Ohio. This favorable equity environment has helped to reduce the overall foreclosure activity across Ohio, and is further predicted to further reduce the number of underwater foreclosures in 2016.”
Among metropolitan statistical areas with a population of at least 500,000, those with the highest percentage of foreclosure homes with equity were Denver (89.6 percent), Austin, Texas (88.8 percent), San Jose, California (87.5 percent), Pittsburgh (85.3 percent), and Nashville (83.6 percent).
As of the end of 2015, 28.4 percent of properties in foreclosure were seriously underwater, down from 33.4 percent at the end of the third quarter of 2015 and down from 34.6 percent at the end of 2014 to the lowest level since RealtyTrac began tracking this metric in the first quarter of 2012.
Markets with the highest percentage of in-foreclosure properties that were seriously underwater were Las Vegas, Nevada (50.2 percent seriously underwater), Chicago, Illinois (46.7 percent), Lakeland, Florida (46.1 percent), Cleveland, Ohio (45.1 percent), and Deltona-Daytona Beach-Ormond Beach, Florida (44.9 percent).
Some characteristics of the 6.4 million U.S. properties seriously underwater as of the end of 2015:
- 41 percent of seriously underwater properties were non-owner occupied, while 59 percent were owner-occupied
- 57 percent of seriously underwater properties had been owned 10 years or less, while 43 percent had been owned more than 10 years
- 63 percent of seriously underwater properties had a loan originated in 2008 or earlier, while 37 percent had a loan originated in 2009 or later
- 33 percent of all properties valued $100,000 or less were seriously underwater, while 8.7 percent of properties valued more than $100,000 were seriously underwater
Profile of equity rich properties
Some characteristics of the 12.6 million equity rich U.S. properties as of the end of 2015:
- 23 percent of equity rich properties were non-owner occupied, while 77 percent were owner-occupied
- 62 percent of equity rich homes had been owned for more than 10 years, while 38 percent had been owned for 10 years or less
- 52 percent of equity rich homes had a loan originated in 2009 or later, while 48 percent had a loan originated in 2008 or earlier
- 47 percent of all properties valued more than $1 million were equity rich, while 21.7 percent of properties valued $1 million or less were equity rich
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.
Seriously underwater: Loan 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.
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.
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RealtyTrac is a leading provider of comprehensive U.S. housing and property data, including nationwide parcel-level records for more than 130 million U.S. properties. Detailed data attributes include property characteristics, tax assessor data, sales and mortgage deed records, distressed data, including default, foreclosure and auctions status, and Automated Valuation Models (AVMs). Sourced from RealtyTrac subsidiary Homefacts.com, the company’s proprietary national neighborhood-level database includes more than 50 key local and neighborhood level dynamics for residential properties, providing unrivaled pre-diligence capabilities and a parcel risk database for portfolio analysis. RealtyTrac’s data is widely viewed as the industry standard and, as such, is relied upon by real estate professionals and service providers, marketers and financial institutions, as well as the Federal Reserve, U.S. Treasury Department, HUD, state housing and banking departments, investment funds and tens of millions of consumers.
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