A magnified look at the state of home equity during the final portion of 2015 might appear pessimistic, but a step back indicates that the year’s fourth quarter was simply a small dip in an otherwise strong and upward trending line.

  • In the final quarter of 2015, 120,000 residential properties fell into negative equity; however, over the course of the whole year, 1 million residential properties regained positive equity.
  • The equity share for Q4 2015 held strong at 91.5 percent, and year-over-year monetary equity gains also proved to be substantial.
  • States with the highest percentage positive equity in Q4 2015 were Texas, Hawaii, Arkansas, Montana and Colorado.

A magnified look at the state of home equity during the final portion of 2015 might appear pessimistic, but a step back indicates that the year’s fourth quarter was simply a small dip in an otherwise strong and upward trending line.

The data as reported by CoreLogic show us that 1 million residential properties regained equity over the course of last year. The market also saw improvements in the area of “under equity” — that which that teeters on the edge of a homeowner’s control at less than 20 percent.

Details painting the big picture

In the first quarter of 2015, CoreLogic reported that approximately 9.7 million (19.4 percent) of mortgage holders with equity dipped below that under-equity threshold, compared to the year’s end, when this number stood at 9.5 million, or 18.9 percent. Those numbers held even stronger earlier in the year, with 8.9 million homes (or 17.6 percent) under equity in the third quarter.

“The number of homeowners with more than 20 percent equity is rising rapidly,” said Anand Nallathambi, president and CEO of CoreLogic, in the fourth quarter report. “Higher prices driven largely by tight supply are certainly a big reason for the rise, but continued population growth, household formation and ultra-low interest rates are also factors.”

In addition, 120,000 residential properties fell into negative equity (the first time that CoreLogic didn’t report quarterly regains) bringing the total number of mortgaged residential properties with equity to 46.3 million in the final quarter.

The number of mortgaged residential properties with negative equity rose nearly 3 percent from the third to fourth quarter, coming in at 4.3 million total (8.5 percent). In comparison, however, there were 5.3 million underwater homes at the same time last year.

The overall equity share for Q4 2015 held strong at 91.5 percent, and year-over-year monetary equity gains also proved to be substantial. “In Q4 of last year home equity increased by 680 billion or 11.5 percent, the 13th consecutive quarter of double digit growth,” said Dr. Frank Nothaft, chief economist for CoreLogic, in the report. “The improvement in equity reflects positive home prices and continued deleveraging of mortgage balances by households.”

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A recent Inman article reported that despite national gains in equity, many mortgage holders are still scarred by the housing bust and tend to underestimate how much the value of their home has increased during the economic recovery. Around 27 percent of homeowners believe their property value increased between 1 and 5 percent, but in reality, “prices actually rose twice that much, or about 10 percent, from November 2013 to November 2015,” according to a study by loanDepot.

On a state level

States with the highest percentage positive equity in Q4 2015 were:

  • Texas (98.0 percent)
  • Hawaii (97.6 percent)
  • Arkansas (97.6 percent)
  • Montana (97.3 percent)
  • Colorado (97.1 percent)

And the top five states where mortgaged residential properties have negative equity included:

  • Rhode Island (13.6 percent)
  • Arizona (14.0 percent)
  • Illinois (14.6 percent)
  • Florida (17.1 percent)
  • Nevada (18.7 percent)

In drilling down to the city level, some metro areas fared better than others. San Francisco, Houston, Denver, Los Angeles and New York had the highest percentage of residences with positive equity. On the other hand, Miami, Las Vegas, Chicago, Washington, D.C., and Boston had the highest percentage of homes with negative equity.

Email Caroline Feeney.

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