Seriously Underwater Properties Decrease by 2.2 Million in 2014, Down 5.8 Million From Peak Negative Equity in Q2 2012

7.1 Million U.S. Residential Properties Still Seriously Underwater, 13 Percent; 11.3 Million Equity Rich Homeowners, Up From 9.1 Million a Year Ago

IRVINE, Calif. — Jan. 22, 2015 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its U.S. Home Equity & Underwater Report for the fourth quarter of 2014, which shows that at the end of the year there were 7,052,570 U.S. residential 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 13 percent of all properties with a mortgage.

The number and share of seriously underwater homeowners at the end of the fourth quarter of 2014 were both at their lowest levels since RealtyTrac began tracking home equity trends in the first quarter of 2012 and are down from a peak of 12.8 million seriously underwater homeowners representing 29 percent of all homeowners with a mortgage in the second quarter of 2012.

“Median home prices nationwide bottomed out in March 2012 and since then have increased 35 percent, lifting 5.8 million homeowners out of seriously underwater territory,” said Daren Blomquist, vice president at RealtyTrac. “While the remaining seriously underwater properties continue to be a millstone around the neck of some local markets, the growing number of equity rich homeowners should help counteract the downward pull of negative equity in many markets, empowering those housing markets — and by extension their local economies — to walk on water in 2015.”

Equity rich properties increase nearly 2.2 million in 2014

There were 11,249,646 equity rich U.S. residential properties with at least 50 percent positive equity at the end of 2014, representing 20 percent of all properties with a mortgage. That was up nearly 2.2 million from 9,097,325 equity rich properties at the end of 2013.

“With price escalation returning home values to near peak levels, homeowners who have positive equity have options before they face foreclosure,” said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market, where 6 percent of residential properties with a mortgage were seriously underwater in the Los Angeles metro area at the end of 2014 compared to 32 percent that were equity rich.

Other major markets where the share of seriously underwater properties was below 10 percent at the end of 2014 included San Jose, Calif., (2 percent), Denver (4 percent), Portland (5 percent), Minneapolis (5 percent), Boston (5 percent), San Francisco (5 percent), Pittsburgh (6 percent), Houston (8 percent), Dallas (8 percent) and Seattle (9 percent).

“I’m happy to report that the number of homeowners in the Seattle area who are underwater continues to decline and foreclosures are falling,” said OB Jacobi, president of Windermere Real Estate, covering the Seattle market. “Thanks to Seattle’s strong economy and thriving housing market, fourth quarter prices grew by more than 11 percent, enabling many homeowners to recover the equity they lost during the Great Recession.”

Distressed properties with positive equity exceeds seriously underwater in Q4

The share of distressed properties — those in some stage of foreclosure — with positive equity surpassed the share of distressed properties that were seriously underwater in the fourth quarter for the first time since RealtyTrac began tracking those metrics a year ago. At the end of the fourth quarter, 42 percent of distressed properties had some positive equity compared to 31 percent a year ago. Meanwhile 35 percent of distressed properties were seriously underwater at the end of the fourth quarter, compared to 48 percent a year ago.

“Over the last year and a half I have had more people come to me thinking they need a short sale only to be shocked by the current market value and the positive equity in their home,” said Frank Duran, broker at RE/MAX Alliance, covering the Westminster, Colo., market in the Denver metro area, where 81 percent of distressed homeowners had positive equity at the end of 2014 — the highest percentage of any market nationwide — compared to 9 percent of distressed homeowners seriously underwater. “We have certainly seen an upward turn in the market.”

Other major markets where the share of distressed properties with positive equity exceeded 60 percent include Pittsburgh (81 percent), Oklahoma City (76 percent), Austin, Texas (73 percent), Nashville (70 percent), San Antonio (63 percent), San Francisco (62 percent), and Raleigh, N.C. (61 percent).

Markets with most seriously underwater properties

Markets with the highest percentage of seriously underwater properties as of the end of 2014 were Las Vegas (30 percent), Orlando (26 percent), Tampa (25 percent), Jacksonville, Fla., (24 percent), Cleveland (24 percent), Miami (24 percent), Detroit (24 percent), Chicago (22 percent) and Atlanta (19 percent).

Markets where the share of distressed properties that were seriously underwater exceeded 40 percent at the end of 2014 included Las Vegas (60 percent), Tampa (52 percent), Jacksonville, Fla., (50 percent), Orlando (49 percent), Chicago (48 percent), Detroit (47 percent), Miami (46 percent), and Cleveland (45 percent).

“As Ohio housing continues to rebound, increased demand from growing job markets in manufacturing, financial, medical, and education are assisting in driving increases in housing prices, and restoring greater equity to homeowners across the state,” said Michael Mahon, executive vice president at HER Realtors, covering the Cincinnati, Columbus and Dayton, Ohio housing markets. “As equity is on the rise, this will create further opportunity for those homeowners remaining in risk of default, to take advantage of the improving prices as their solution to avoid foreclosure.”

Seriously underwater by loan vintage

The percentage of loans seriously underwater were higher for loans originated during the housing bubble years of 2004 to 2008, with 36 percent of all loans originated in 2006 seriously underwater — the most of any loan vintage, followed by 2007 (32 percent), 2005 (28 percent), 2008 (22 percent), and 2004 (19 percent).

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

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.

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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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About RealtyTrac

RealtyTrac is a leading supplier of U.S. real estate data, with nationwide parcel-level records for more than 130 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:

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jennifer.vonpohlmann@realtytrac.com

Ginny Walker
949.502.8300, ext. 268
ginny.walker@realtytrac.com

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