IRVINE, Calif., Dec. 15, 2015 /PRNewswire/ -- CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled services provider, today released a new analysis showing 256,000 properties regained equity in the third quarter of 2015, bringing the total number of mortgaged residential properties with equity at the end of Q3 2015 to approximately 46.3 million, or 92.0 percent of all homes with an outstanding mortgage. Nationwide, borrower equity increased year over year by $741 billion in Q3 2015.
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The total number of mortgaged residential properties with negative equity stood at 4.1 million, or 8.1 percent, in Q3 2015. That was down 4.7 percent quarter over quarter from 4.3 million homes, or 8.7 percent, compared with Q2 2015* and down 20.7 percent year over year from 5.2 million homes, or 10.4 percent compared with Q3 2014.
Negative equity, often referred to as "underwater" or "upside down," applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or a combination of both.
For the homes in negative equity status, the national aggregate value of negative equity was $301 billion at the end of Q3 2015, declining approximately $8.1 billion from $309.1 billion in Q2 2015, a decrease of 2.6 percent. On a year-over-year basis, the value of negative equity declined overall from $341 billion in Q3 2014, representing a decrease of 11.8 percent in 12 months.
Of the more than 50 million residential properties with a mortgage, approximately 8.9 million, or 17.6 percent, have less than 20 percent equity (referred to as "under-equitied") and 1.1 million, or 2.2 percent, have less than 5 percent equity (referred to as near-negative equity). Borrowers who are "under-equitied" may have a difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints. Borrowers with near-negative equity are considered at risk of moving into negative equity if home prices fall.
"Home price growth continued to lift borrower equity positions and increase the number of borrowers with sufficient equity to participate in the mortgage market," said Frank Nothaft, chief economist for CoreLogic. "In Q3 2015 there were 37.5 million borrowers with at least 20 percent equity, up 7 percent from 35 million in Q3 2014. In the last three years, borrowers with at least 20 percent equity have increased by 11 million, a substantial uptick that is driving rapid growth in home equity originations."
"Homeowner equity is the largest source of wealth for many Americans," said Anand Nallathambi, president and CEO of CoreLogic. "The rise in home prices, expected to be at least 5 percent in 2016, will continue to build wealth and confidence across America. As this process continues, it will provide support for the housing market and the broader economy throughout next year."
Highlights as of Q3 2015:
- Nevada had the highest percentage of mortgaged residential properties in negative equity at 19.0 percent, followed by Florida (17.8 percent), Arizona (14.6 percent), Rhode Island (12.3 percent) and Maryland (12.1 percent). Combined, these five states account for 29.3 percent of negative equity in the U.S.
- Texas had the highest percentage of mortgaged residential properties in positive equity at 97.9 percent, followed by Alaska (97.7 percent), Hawaii (97.6 percent), Colorado (97.2 percent) and Montana (97.1 percent).
- Of the 10 largest metropolitan areas based on mortgage count, Phoenix-Mesa-Scottsdale, Ariz. had the highest percentage of mortgaged residential properties in negative equity at 14.2 percent, followed by Chicago-Naperville-Arlington Heights, Ill. (13.8 percent), Riverside-San Bernardino-Ontario, Calif. (11.4 percent), Washington-Arlington-Alexandria, DC-Va.-Md.-W.Va. (10.8 percent) and Atlanta-Sandy Springs-Roswell, Ga. (9.7 percent).
- Of the same 10 metropolitan areas, Houston-The Woodlands-Sugar Land, Texas had the highest percentage of mortgaged residential properties with positive equity at 98.2 percent, followed by Dallas-Plano-Irving, Texas (97.9 percent), Los Angeles-Long Beach-Glendale, Calif. (95.4 percent), Minneapolis-St. Paul-Bloomington, Minn.-Wis. (94.4 percent) and New York-Jersey City-White Plains, N.Y.-N.J. (94.3 percent).
- Of the total $301 billion in negative equity nationally, first liens without home equity loans accounted for $165 billion, or 54.8 percent, in aggregate negative equity, while first liens with home equity loans accounted for $136 billion, or 45.2 percent.
- Approximately 3.1 million underwater borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $229,000 and the average underwater amount is $58,000.
- Approximately 1.6 million underwater borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $307,000 and the average underwater amount is $83,000.
- The bulk of positive equity for mortgaged residential properties is concentrated at the high end of the housing market. For example, 95 percent of homes valued at $200,000 or more have equity compared with 87 percent of homes valued at less than $200,000.
*Q2 2015 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.
Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming have insufficient equity data to report at this time. *This data only includes properties with a mortgage. Non-mortgaged properties are, by definition, not included. Source: CoreLogic Q3 2015
Methodology The amount of equity for each property is determined by comparing the estimated current value of the property against the mortgage debt outstanding (MDO). If the MDO is greater than the estimated value, then the property is determined to be in a negative equity position. If the estimated value is greater than the MDO, then the property is determined to be in a positive equity position. The data is first generated at the property level and aggregated to higher levels of geography. CoreLogic data includes 49 million properties with a mortgage, which accounts for more than 85 percent of all mortgages in the U.S. CoreLogic uses public record data as the source of the MDO, which includes both first-mortgage liens and second liens, and is adjusted for amortization and home equity utilization in order to capture the true level of MDO for each property. The calculations are not based on sampling, but rather on the full data set to avoid potential adverse selection due to sampling. The current value of the property is estimated using a suite of proprietary CoreLogic valuation techniques, including valuation models and the CoreLogic Home Price Index (HPI). Only data for mortgaged residential properties that have a current estimated value is included. There are several states or jurisdictions where the public record, current value or mortgage data coverage is thin. These instances account for fewer than 5 percent of the total U.S. population.
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About CoreLogic CoreLogic (NYSE: CLGX) is a leading global property information, analytics and data-enabled services provider. The company's combined data from public, contributory and proprietary sources includes over 4.5 billion records spanning more than 50 years, providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, and the public sector. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and managed services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in North America, Western Europe and Asia Pacific. For more information, please visit www.corelogic.com.
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