There were 9.1 million seriously underwater homes in the US in the first quarter, down 26% from 10.9 million in the first quarter of 2013, according to RealtyTrac’s
US Home Equity & Underwater Report. A home is defined as seriously underwater when the combined loan amount on the property is at least 25% higher than the property’s estimated market value.
The number of properties with at least 50% equity grew to 9.9 million in the first quarter, representing 19% of all mortgaged properties. That’s up from 9.1 million in the fourth quarter of 2013.
There were also fewer distressed properties with negative equity in Q1, with 45% of all properties in foreclosure seriously underwater. That’s downs from 48% in the fourth quarter of 2013 and 58% from a year ago. The share of foreclosure properties with positive equity rose to 35% in the first quarter, up from 31% in the fourth quarter of 2013.
“US homeowners are continuing to recover equity lost during the Great Recession, but the pace of that recovering equity slowed in the first quarter, corresponding to slowing home price appreciation,” said Daren Blomquist, vice president at RealtyTrac. “Slower price appreciation means the 9 million homeowners seriously underwater could still have a long road back to positive equity.
“The relatively high percentage of foreclosures with equity is surprising to many because it would seem homeowners with equity could easily avoid foreclosure by leveraging that equity by refinancing or with an equity sale of the home,” Blomquist added. “But many distressed homeowners with equity may not realize they have equity and in some cases have vacated the property already, assuming that foreclosure is inevitable.”
Nevada had the highest percentage of properties seriously underwater with 34%, followed by Florida (31%), Illinois (30%), Michigan (29%) and Ohio (27%).
The number of seriously underwater residential properties has reached its lowest level in two years – but the pace of equity recovery is slowing, according to data released today.