Underwater Properties Decreasing as Equity Rises

RealtyTrac®  released today its U.S. Home Equity & Underwater Report for the fourth quarter of 2014, showing that at the end of the year there were 7,052,570 U.S. residential properties seriously underwater — where the combined loan amount secured by the property is at least 25% higher than the property’s estimated market value — representing 13% of all properties with a mortgage.

The number and share of seriously underwater homeowners at the end of the fourth quarter of 2014 were both at their lowest levels since RealtyTrac began tracking home equity trends in the first quarter of 2012 and are down from a peak of 12.8 million seriously underwater homeowners representing 29% of all homeowners with a mortgage in the second quarter of 2012.

Equity rich properties increase nearly 2.2 million in 2014

There were 11,249,646 equity rich U.S. residential properties with at least 50% positive equity at the end of 2014, representing 20% of all properties with a mortgage. That was up nearly 2.2 million from 9,097,325 equity rich properties at the end of 2013.

Major markets where the share of seriously underwater properties was below 10% at the end of 2014 included Los Angeles (6%) San Jose, Calif., (2%), Denver (4%), Portland (5%), Minneapolis (5%), Boston (5%), San Francisco (5%), Pittsburgh (6%), Houston (8%), Dallas (8%) and Seattle (9%).

Distressed properties with positive equity exceeds seriously underwater in Q4

The share of distressed properties — those in some stage of foreclosure — with positive equity surpassed the share of distressed properties that were seriously underwater in the fourth quarter for the first time since RealtyTrac began tracking those metrics a year ago. At the end of the fourth quarter, 42% of distressed properties had some positive equity compared to 31% a year ago. Meanwhile 35% of distressed properties were seriously underwater at the end of the fourth quarter, compared to 48% a year ago.

Major markets where the share of distressed properties with positive equity exceeded 60% include Denver (81%) Pittsburgh (81%), Oklahoma City (76%), Austin, Texas (73%), Nashville (70%), San Antonio (63%), San Francisco (62%), and Raleigh, N.C. (61%).

Markets with most seriously underwater properties

Markets with the highest percentage of seriously underwater properties as of the end of 2014 were Las Vegas (30%), Orlando (26%), Tampa (25%), Jacksonville, Fla., (24%), Cleveland (24%), Miami (24%), Detroit (24%), Chicago (22%) and Atlanta (19%).

Markets where the share of distressed properties that were seriously underwater exceeded 40% at the end of 2014 included Las Vegas (60%), Tampa (52%), Jacksonville, Fla., (50%), Orlando (49%), Chicago (48%), Detroit (47%), Miami (46%), and Cleveland (45%).

Seriously underwater by loan vintage

The percentage of loans seriously underwater were higher for loans originated during the housing bubble years of 2004 to 2008, with 36% of all loans originated in 2006 seriously underwater — the most of any loan vintage, followed by 2007 (32%), 2005 (28%), 2008 (22%), and 2004 (19%)

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