The total number of mortgaged residential properties with equity currently stands at almost 43 million as approximately 791,000 homeowners returned to positive equity during the third quarter, according to data from CoreLogic.
The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market, the Irvine, Calif.-based data provider said. For example, 92% of homes valued for more than $200,000 have equity compared with 82% that are priced for less than this figure.
Of all homeowners in positive equity, 10 million have less than 20% equity and are considered to be “under-equitied.” These borrowers could have a difficult time obtaining new financing for their homes due to underwriting constraints.
Meanwhile, the analysis indicates that nearly more than 6 million homes, or 13% of all residential properties with a mortgage, were still in negative equity at the end of the third quarter. This figure is down from more than 7 million homes from the previous quarter.
The national aggregate value of negative equity decreased quarter-over-quarter by almost $34 billion, from $430 billion at the end of 2Q13 to $397 through 3Q13.
On average, residential properties that are “upside down” are underwater by 33%. Of the 6.4 million homes in negative equity, 3.8 million have first mortgages only and are underwater by an average of $53,000.
Additionally, 2.5 million upside down borrowers hold both first and second liens, in which the average negative equity amount is $77,000.
Nevada had the highest percentage of underwater mortgaged properties at almost 33%, followed by Florida (roughly 29%), Arizona (22.5%), Ohio (18%) and Georgia (almost 18%). These five states combined accounted for more than 36% of negative equity in the U.S.
Negative equity typically occurs due to a decline in home value, an increase in mortgage debt or a combination of both.
If home prices rise another 5%, an additional 1 million-plus homes would regain positive equity, CoreLogic says.
“We should see a further rebound in consumer confidence and economic growth in 2014 as more homeowners escape the negative equity trap,” said Anand Nallathambi, president and CEO of CoreLogic. “Home price appreciation has helped more than 3 million property owners regain equity since the first quarter of 2013.”