As low interest rates combined with limited inventory, home prices jumped allowing hundreds of thousands of underwater homeowners to climb out of their negative equity in the first quarter of this year, according to data from real estate information firm CoreLogic.
“The negative equity burden continues to recede across the country thanks largely to rising home prices,” Anand Nallathambi, president and CEO of CoreLogic said in a press release. “We are still far below peak home price levels, but tight supplies in many areas coupled with continued demand for single family homes should help us close the gap.”
During the first three months of 2013, roughly 850,000 mortgage borrowers gained enough equity to no longer be considered upside-down on their loans. That reduced the total number of underwater homeowners to 9.7 million, or 19.8 percent of all properties with a mortgage loan. That is down from the fourth quarter of 2012 when 10.5 million, or 21.7 percent of all mortgaged properties had negative equity.
Being underwater, upside-down or having negative equity all refer to a mortgage where the borrower owes more on the mortgage than the property is worth.
Underwater homeowners are still relatively concentrated in certain states. During the first quarter of this year, Nevada had the highest rate of upside-down mortgages with 45.4 percent of all properties with a home loan. Florida was second with a 38.1 percent underwater rate, followed by Michigan with 32 percent, Arizona with 31.3 percent and Georgia with 30.5 percent. These five states combined make up 32.8 percent of all U.S. negative equity.
Negative equity is also heavily weighted toward the lower-priced homes. CoreLogic found that only 73 percent of homes valued at less than $200,000 had positive equity compared versus 88 percent of those home valued above $200,000.
Increased home prices and fewer underwater borrowers will help the housing recovery along as more and more homeowners are free to sell their homes again.