While the percentage of properties with negative equity decreased during 2015, the lowest-priced homes continued to struggle to regain value, according to Black Knight Financial Services.
The number of underwater borrowers dropped by 31%, or 1.5 million homeowners, but there are still a total of 3.2 million borrowers in negative equity positions, representing $126 billion in underwater first- and second-lien housing debt, Black Knight said in its year-to-year Mortgage Monitor Report for February.
As negative equity rates continue to improve on the national level and are now at 6.5%, for homes in the lowest-price tier they are at 16.2%, revealing an imbalance in both home price levels and geography. More than half of the nation's underwater homes fell into the lowest 20% of home prices in their respective markets.
In Nevada, where home prices are 34% below their peak, more than 14% of borrowers are underwater on their mortgages, the largest share in the nation. By volume, Florida leads the nation with just under 500,000 underwater borrowers. The only state to see its underwater population rise year-to-year in 2015 was Missouri, from 9% to 12%, due to falling home prices.
The report found that in some metro area markets, where the lowest 20% of homes have experienced higher levels of recent home price appreciation than the higher end, negative equity rates are still substantial: Memphis, Tenn., and Cleveland are at 43%, followed by Detroit at 42%, where homes in the lowest-price tier are 33 times more likely to be underwater than those in the highest tier.
Moreover, the report said so-called serial refinancers played a larger role in the rise and fall of refinance volumes throughout 2015, driven by interest rate fluctuations. As rates dropped early in the year, refinances from borrowers who held their prior loan for less than two years jumped 800%.
Similarly, when rates rose later in the year, this population dropped by 65% and two-thirds of refinances came from people who had had their prior mortgages for four or more years. The report also found that term reductions are gaining in popularity, with 37% of 2015 fourth-quarter refinances going into a shorter term.
"Throughout 2015, the negative equity population in the U.S. decreased by over 30%, bringing another 1.5 million homeowners out from underwater on their mortgages," Ben Graboske, Black Knight's senior vice president of data and analytics, said in a statement. "However, even after four years of improvement, the recovery has not reached all corners."