CoreLogic is out with their quarterly report and map of underwater homeowners. Their analysis is “showing approximately 200,000 more residential properties returned to a state of positive equity during the fourth quarter of 2012. This brings the total number of properties that moved from negative to positive equity in 2012 to 1.7 million and the number of mortgaged residential properties with equity to 38.1 million. The analysis also shows that 10.4 million, or 21.5 percent of all residential properties with a mortgage, were still in negative equity at the end of the fourth quarter of 2012. This figure is down from 10.6 million* properties, or 22 percent, at the end of the third quarter of 2012.
Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.
Of the 38.1 million residential properties with positive equity, 11.3 million have less than 20 percent equity. Borrowers with less than 20 percent equity, referred to as “under-equitied,” may have a more difficult time obtaining new financing for their homes due to underwriting constraints. At the end of the fourth quarter, 2.3 million residential properties had less than 5 percent equity, referred to as near-negative equity. Properties that are near negative equity are at risk should home prices fall. Under-equitied mortgages accounted for 23.2 percent of all residential properties with a mortgage nationwide in the fourth quarter of 2012. The average amount of equity for all properties with a mortgage is 31 percent.”
When I look at the map and see all those counties with more than half of homeowners underwater I can see how far the housing market has to go until it’s recovered. But the situation is even worse because even the counties that are colored dark blue on the map have up to 25% of their homeowners upside down.
The “under-equitied” numbers are important too because they form part of the hoard of zombie homeowners who are stuck in their home because the sale won’t generate enough proceeds for the downpayment on their next one; good for apartment building investment but that also means that they can’t move for new job opportunities either.
Ten plus million homes underwater and eleven plus million homes under-equitied equals almost twenty two million zombie homeowners. That is 45% of all mortgages in the US and that’s a big number holding back the pace of recovery.