Millions of homes still deeply underwater

by Ryan Smith09 Jan 2014
More than 9 million U.S. homes were still deeply underwater in December, according to data released today.

In its U.S. Home Equity & Underwater Report for December, housing data firm RealtyTrac estimated that 9.3 million U.S. residential properties remained deeply underwater – worth at least 25% less than their mortgages – last month. That’s about 19% of all residential properties with mortgages.

Still, the situation is improving. December’s numbers were down from 10.7 million, or 23% of all homes with a mortgage, in September, and well down from the May 2012 peak in negative equity, when 12.8 million homes were deeply underwater.

The number of properties with at least 50% equity grew considerably during the fourth quarter, from 7.4 million in September to 9.1 million in December.

“During the housing downturn we saw a downward spiral of falling home prices resulting in rising negative equity, which in turn put millions of homeowners at higher risk for foreclosure when they encountered a trigger event such as job loss,” said Daren Blomquist, vice president at RealtyTrac. “Now we are seeing the reverse trend: rising home prices resulting in falling negative equity, which in turn is giving millions of homeowners a lifeline to avoid foreclosure when they encounter a trigger event. On the other end of the spectrum, the percentage of equity-rich homeowners is nearing a tipping point that should result in a larger inventory of homes listed for sale and give the overall economy a nice shot in the arm in 2014.

“However, there are still millions of homeowners who are in such a deep equity hole that it will take years for them to regain their equity,” Blomquist said. “The longer these homeowners remain in a negative equity position without relief in the form of a principal loan balance reduction, the more likely that foreclosure will become the path of least resistance for them.”

Nevada had the highest percentage of residential properties deeply underwater in December at 38%. Other states with high numbers of underwater homes included Florida (34%), Illinois (32%), Michigan (31%), Missouri (28%) and Ohio (28%).


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