Study: 6.4 Million US Homeowners Have ‘Underwater’ Mortgages
Irvine, Calif. (CBS TAMPA) — While rising home prices helped lift approximately 791,000 residential U.S. properties to a state of positive equity, 6.4 million homes remain weighted down by “underwater” mortgages.
The third quarter report from financial and property analysis company CoreLogic shows that 13 percent – or 6.4 million – of all homeowners are still in negative equity despite that number having dropped from 7.2 million at the end of the second quarter this year.
Negative equity, or “underwater” mortgages, indicates that borrowers owe more on their mortgages than their property is worth. This occurs as a result of depreciating home value, increase in mortgage debt, or both.
An improvement on home prices is accredited for bringing the value of U.S. negative equity down from $430 billion to $397 billion over the course of the third quarter of 2013.
And economists for CoreLogic remain optimistic about future home values.
“Rising home prices continued to help homeowners regain their lost equity in the third quarter of 2013,” said Mark Fleming, chief economist for CoreLogic. “Fewer than 7 million homeowners are underwater, with a total mortgage debt of $1.6 trillion. Negative equity will decline even further in the coming quarters as the housing market continues to improve.”
The study found that Nevada had the highest percentage of negative equity, with nearly one-third (32.2 percent) of mortgaged properties sitting underwater.
Florida had the second-most “upside-down” mortgages at 28.8 percent of its residential properties also remaining negative. The Orlando-Kissimmee-Sanford area had the highest percentage of negative equity mortgages in the country, at 32.3 percent.
Of the total $397 billion in negative equity, first liens without home equity loans accounted for $202 billion aggregate negative equity, while first liens with home equity loans accounted for $195 billion.
Economists at CoreLogic predicted economic growth in 2014 will pull more homes out of negative equity over the course of next year.
“We should see a further rebound in consumer confidence and economic growth in 2014 as more homeowners escape the negative equity trap,” said Anand Nallathambi, president and CEO of CoreLogic. “Home price appreciation has helped more than 3 million property owners regain equity since the first quarter of 2013.”