- The percentage of negative equity homes dropped to 7.1 percent in the U.S., or roughly 3.6 million homes.
- Economists at CoreLogic believe home prices will rise another 5 percent over the year, which would free up another 700,000 residential properties from negative equity.
- In the Chicago area, 13.7 percent of homes had negative equity in the second quarter.
CoreLogic’s quarterly equity report shows 548,000 residential properties in the U.S. regaining equity in the second quarter of 2016, while the total number of mortgaged residential properties with equity sat at 47.2 million.
Of the 47.2 million mortgaged residential properties, 17 percent (8.7 million) were considered under-equitied, the report shows. This percentage of borrowers has less than 20 percent home equity.
“Home value gains have played a large part in restoring home equity,” CoreLogic Chief Economist Dr. Frank Nothaft wrote in the report.
The CoreLogic Home Price Index showed 5.2 percent growth through June. Dr. Nothaft credits home price growth with helping the number of negative equity homeowners to drop by 850,000 in the second quarter from the previous year.
There is an even smaller percentage of near-negative equity properties. Near-negative equity refers to homes with less than 5 percent equity. Only 1.9 percent of properties are in this category, but they are at higher risk should home prices suddenly decline, according to CoreLogic.
However, the amount of negative equity homes dropped 8.9 percent over the quarter. The amount of homes underwater is only 7.1 percent of the total, or roughly 3.6 million homes.
Nevada has the highest percentage of negative equity residential properties, at 15.3 percent of the total. Florida, Maryland, Illinois and Arizona round out the top five cities with the most negative equity.
Residential properties with equity account for 98.3 percent of all properties in Texas, which was good for best in the nation. Alaska, Colorado, Hawaii and Utah are also ranked in the top five.
“We see home prices rising another 5 percent in the coming year based on the latest projected national CoreLogic Home Price Index. Assuming this growth is uniform across the U.S., that should release an additional 700,000 homeowners from the scourge of negative equity,” CoreLogic President and CEO Anand Nallathambi said in the report.
The report also shows that the national average loan-to-value (LTV) ratio is 56 percent. The 700,000 homes Nallathambi is talking about are the 1.4 percent share of homes with LTV of 100 to 105 percent.
The state of Illinois has a high percentage of negative equity homes, the report shows. Throughout the state, 11.7 percent of homes were considered underwater in the second quarter. Illinois, Arizona, Florida, Nevada and Maryland accounted for 33.7 percent of the negative equity in the country.
In the Chicago area, 13.7 percent of homes had negative equity in the second quarter– good for the third highest metro in the country after Las Vegas and Miami.