Dramatic price increases in 2013 helped lift 4 million American homeowners out of negative equity last year, according to property information firm CoreLogic, a positive sign for the recovering housing market.
There are now 6.5 million homes, or 13.3 percent of all residential, mortgaged properties that are underwater – when a borrower owes more on the mortgage than the home is worth – down from the peak of December 2009 peak when 12 million homeowners were in negative equity territory.
“Stability and growth in the housing market are essential for a durable recovery of the U.S. economy,” said Anand Nallathambi, president and CEO of CoreLogic in a statement. “The rebound in home prices in 2013 helped 4 million property owners regain at least some positive equity in their largest asset—their home. We still have a long way to go to eliminate the negative equity overhang but significant progress is being made every day across most of the country.”
The situation does remain precarious though for those who are still underwater and even for those who have just a little bit of equity. There are 10 million homeowners nationwide who have less than 20 percent equity in their homes, a classification known as “under-equitied,” and 1.6 million of those have less than 5 percent equity. They are at the most risk for going back into negative equity depending on how the housing market moves in the next year.
The states that still have the highest percentage of underwater borrowers are Nevada with 30.4 percent, Florida at 28.1 percent, Arizona with 21.5 percent, Ohio with 19.0 percent and Illinois with 18.7 percent.
On a national average however, homeowners are in a much better place today than they were a year ago and while prices are not expected to rise as quickly as they did in 2013, they are predicted to rise enough to pull many more borrowers into positive equity by year’s end.