• The number of seriously underwater homeowners dropped significantly in the third quarter of 2015 due to rising home sales volumes and prices.

  • The number of equity rich homeowners went down, at the same time, as more homeowners leveraged their equity and refinanced, traded up or cashed out completely.


  • Only one in three properties in foreclosure was seriously underwater, the lowest level since RealtyTrac began tracking in the Q1 2012 and down from a peak of 62 percent underwater in the second quarter of 2012.

The third quarter of 2015 (Q3) saw a dramatic drop in seriously underwater homeowners and a surge in home sales volumes and prices, according to the Realtytrac U.S. Home Equity & Underwater report for Q3.

Only one in three properties in foreclosure was seriously underwater, the lowest level since RealtyTrac began tracking in the Q1 2012 and down from a peak of 62 percent underwater in the second quarter of 2012.

image002

There were 6.9 million seriously underwater (at least 25 percent underwater) U.S. residential properties at the end of Q3 2015, down more than half a million from the previous quarter and down more than 1.2 million compared to a year ago.

“After a lull late last year and early this year, home sales volume and average sales prices picked up dramatically again in the second and third quarters of this year, resulting in a substantial drop in seriously underwater homeowners,” said Daren Blomquist, Vice President at RealtyTrac.

People who have owned for five to ten years are most likely to be underwater because they bought in the last bubble, he said. Among residential properties with a mortgage that have been owned between five and 10 years, 17.2 percent are seriously underwater.

At the other end of the spectrum, 39.3 percent of homes owned for 20 years or more are equity-rich — the highest equity-rich share of any years-owned range analyzed by RealtyTrac.

Meanwhile, in June and July this year, the market saw the highest two months of sales volumes RealtyTrac has seen since August 2006.

“It was a real jump,” said Blomquist.

“We are seeing inventory loosen up. It all ties together, people are more confident about having more equity, putting their homes up for sale, so there is much more inventory, boosting the number of sales,” he added.

Given the current climate, it could be argued, “it’s great time to sell,” he said.

“According to our data nationally, people who sold in the third quarter of this year are selling for 15 percent above what they bought for, which is the biggest increase since 2007,” said Blomquist.

In hot markets like San Jose, California, this figure rises to 33 percent.

The other main change, shown in today’s report, was there were 10.5 million equity-rich (with at least 50 percent equity) U.S. residential properties at the end of the third quarter, down nearly a half million from the second quarter.

It seems that more homeowners with equity are leveraging their equity with a refinance, a move-up sale and purchase, or by cashing out of the housing market completely.

Refinancing could be happening as home values rise and homeowners feel confident to remodel their homes, said Blomquist.

“If not moving up to a bigger home, they will take the equity to do a remodel,” he said.

The only concern with people leveraging their equity, he said, is that they are not using their home as an ATM and expecting homes to rise in price and naturally get high growth.

“It was just a mistake made in the last housing bubble. But lending restrictions are still pretty tight,” said the RealtyTrac VP.

RealtyTrac

Email Gill South.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Will you attend ICLV virtually or in-person? The agenda is packed with stellar speakers and sessions.Learn More×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription