The Irvine, Calif.-based analytic firm’s report shows that while 10.7 million residential homeowners nationwide owe at least 25% or more on their mortgages than their properties are worth, another 8.3 million homeowners are either slightly underwater or in positive equity, and are on track to have enough equity to sell sometime in the next 15 months without executing a short sale.
“Steadily rising home prices are lifting all boats in this housing market and should spill over into more inventory of homes for sale in the coming months if home prices continue to increase at the rate of 1.33% per month that they have since bottoming out in March 2012,” said Daren Blomquist, vice president at RealtyTrac.
The 8.3 million resurfacing equity homeowners have a loan-to-value ratio from 90% to 110%, meaning they have between 10% positive equity and 10% negative equity. These homeowners represent 18% of all tenants with a mortgage as of the beginning of September.
Resurfacing equity homes are most common in Omaha (29%), Colorado Springs (29%), Tulsa (29%), Little Rock (28%) and Raleigh (28%).
On the other hand, the 10.7 million residential homeowners who are more deeply underwater have an LTV ratio of at least 125% and accounted for 23% of all U.S. properties with a mortgage. This is down from 12.5 million deeply underwater properties a year ago.
Nevada, Illinois, Florida, Michigan, Rhode Island and Ohio have the highest percentage of deeply underwater homes.
“For the past few years, many people have been unable to sell their homes and upgrade due to lack of equity or in some cases negative equity,” said Rich Cosner, president of Prudential California Realty, which covers Orange, Riverside and San Bernadino counties in California. “With the tremendous growth in equity over the past year, many homeowners are now able to sell their homes and rebuy, which is a very positive outcome for the real estate market.”
Blomquist added that nearly one in four homeowners in foreclosure has at least some equity. Therefore, this would help them avoid foreclosure without “resorting to a short sale” as long as they don’t miss the opportunity to leverage that equity.
“Even homeowners deeply underwater have reason for hope, with about 150,000 each month rising past the 25% negative equity milestone—although it will certainly take years rather than months before most of those homeowners have enough equity to sell other than via short sale,” Blomquist continued.
RealtyTrac also said that 7.4 million homeowners have at least 50% equity. The metropolitan markets of Honolulu, Pittsburgh, San Francisco, New York, San Jose, Calif., and Poughkeepsie, N.Y., consist of the highest percentage of homeowners who have this equity amount.
“Many homeowners have been predisposed to having negative equity for several years and may not realize that if they put their home on the market at the right price they could sell for a favorable outcome,” said Dan Forsman, president and CEO of Prudential Georgia Realty. “The market is starving from a lack of inventory, but as the dial of the housing market moves towards positive and home appreciation continues to climb, there will certainly be an increase in the supply of properties.”