CoreLogic Report Shows Improvement but Indicates Many U.S. Borrowers Still Underwater

By Daniel Duffield

The fourth quarter of 2012 concluded with an additional 200,000 homeowners seeing their home equity shift from negative to positive, or reaching a state in which they no longer owe more on their mortgage balance than the fair market value of their homes, said CoreLogic on Tuesday. According to the report, although the housing recovery continues to make some progress, the rate at which underwater homeowners are seeing their equity become positive is currently decelerating.

CoreLogic indicated that the primary factor causing this shift in home equity is the recent rise in home prices nationally that has demonstrated some of the growing strength of the housing recovery effort.

As a result of this pricing shift, approximately 38.1 million U.S. mortgaged properties now have some accumulated equity, although 10.5 million, or 21.5%, of all mortgaged properties continue to have negative equity.

This number has declined slightly from the 10.6 million figure representing the end of the third quarter of 2012. At the conclusion of the second quarter of 2012, roughly 1.3 million borrowers had gone from being underwater to having some positive equity. Moreover, at the start of the third quarter, 10.7 million, or 22%, of all mortgaged homes had negative equity, decreasing from 10.8 during the second quarter.

In total, the national overall negative equity decreased by $42 billion to $628 billion by the conclusion of the fourth quarter, down from the $670 billion average during the third quarter of 2012.

Despite this growth of national equity, many homeowners are not significantly closer to paying off their mortgages. According to the CoreLogic report, 11.3 million of the 38.1 million positive equity homes have less than 20% equity.

Considering that the national average amounts to 31% equity, a substantial amount of borrowers have quite a long way to go before being mortgage free.

Dr. Mark Fleming, chief economist for CoreLogic,  stated that the fourth quarter saw a noticeable growth in national household equity, and that general improvements to the housing market, specifically in the states most affected by the housing market bubble burst, have been paramount in ushering in this positive trend.

Of the states with a large portion of underwater borrowers, Nevada had the highest ratio of properties with underwater mortgages, averaging approximately 52.4% of relevant households. Nevada was followed next by Florida, which had 40.2% of appropriate homes with negative equity.

Furthermore, despite the rebound for the Arizona housing market in 2012, roughly 34.9% of properties have negative equity. Next come Georgia and Michigan, which have underwater mortgage rates of 31.9% and 33.8%, respectively. These five state housing markets are attributable for 32.7% of the national negative equity.

Gretchen Wegrich

Gretchen Wegrich is an editor at Lender411. She specializes in mortgage basics, personal finance and green living. She graduated with a bachelor's degree in writing from University of California, San Diego and previously worked at the Santa Cruz Sentinel. Contact her at gretchen@lender411com.