Overall, borrowers with underwater mortgages fell by 32% during the first six months of this year. That included a 26% drop in underwater borrowers from 9.6 million in the first quarter to 7.1 million as of June 30.
CoreLogic economists drilled down into the 7.1 million figure and found 4.3 million of those borrowers have just one mortgage and 2.8 million also have a junior lien.
As of June 30, “more than 52% of the properties with values at less than $100,000 that have a junior lien are in negative equity,” according to CoreLogic deputy chief economist Sam Khater.
Overall, 14.5% of homeowners were underwater at the end of the second quarter. In a healthy market, the rate of negative equity is usually between 3% to 5%, according to CoreLogic chief economist Mark Fleming.
The next 10 percentage point drop in negative equity is going to be the “hardest,” Fleming warned in an interview, and the reduction in negative equity will be slow going forward.
“That’s because the homeowners are in rundown properties that are only worth $70,000,” the chief economist says. Nobody wants to buy them. “It is the worst that is left,” he added.