The improved national housing market is having an impact on homeowners who are “underwater” on their mortgages, showing slight improvement from the first quarter of 2016 and more than a percentage point drop from this time last year, according to a recent study.
The study, U.S. Home Equity and Underwater Report, conducted by ATTOM Data Solutions (the new parent company of RealtyTrac) found that there were just under 6.7 million seriously underwater properties – representing 11.9 percent of all U.S. properties with a mortgage as of the end of the second quarter 2016 – down from 12.0 percent in the previous quarter and down from 13.3 percent in Q2 2015.
In South Carolina, 92,251 properties were characterized as seriously underwater, representing 10.9 percent of the homes with a mortgage that was a full point under the national figure. That was nearly 4,200 fewer homes than year ago statewide.
For the report, ATTOM analyzed recorded mortgage and deed of trust data from more than 1,400 U.S. counties accounting for 88 percent of the U.S. population, along with automated valuation models (AVMs) for more than 56 million properties with mortgages in those counties. ATTOM is an Irvine, Calif.-based company that provides detailed housing market data.
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“Rising home prices are lifting all home equity boats: bailing out seriously underwater homeowners and enriching homeowners who already have positive equity,” Daren Blomquist, senior vice president at ATTOM said in a statement. “Nationwide home prices reached a new all-time high in June on the heels of 52 consecutive months of annual increases. While that national trend is consistent in most markets across the country, there are still some local markets and sub-markets that have been largely left behind by the housing recovery and which still have a high percentage of underwater homeowners.”
The number of seriously underwater properties decreased by 37,235 compared to the first quarter and decreased by 776,958 compared to a year ago. Since the peak of 12.8 million in Q2 2012, the number of seriously underwater properties has decreased by more than 6.1 million.
There were a total of 12,383,345 equity rich properties representing 22.1 percent of all U.S. properties with a mortgage at the end of Q2 2016 — up from 22.0 percent in the previous quarter and 19.6 percent in Q2 2015. The number of equity rich properties increased by 47,694 compared to the previous quarter and increased by more than 1.4 million compared to a year ago.
Among 88 metropolitan statistical areas analyzed for the report with a population of 500,000 or more and sufficient data, those with the highest share of seriously underwater properties were Cleveland, Ohio (27.5 percent); Las Vegas (25.7 percent); Akron, Ohio (24.9 percent); Dayton, Ohio (24.1 percent); and Toledo, Ohio (23.6 percent).
Other major markets with a population of 2 million or more where the share of seriously underwater homeowners exceeded 15 percent included Chicago (22.5 percent); Detroit (21.3 percent); Kansas City (21.2 percent), Orlando (19.1 percent), St. Louis (17.8 percent), Tampa-St. Petersburg (17.8 percent), Miami (17.3 percent), Baltimore (16.4 percent), and Cincinnati (15.6 percent).
“South Florida continues to see an equity improvement greater than the national average due to our strong growth,” said Mike Pappas, CEO and president at the Keyes Co., covering the South Florida market. “Our underwater homes saw a 3-x improvement over the average with the high equity owners experiencing a 1.8-x improvement. With our limited land and strong in-migration we will continue to see improvement in equity.”
States with the highest percentage of seriously underwater properties were Nevada (22.2 percent), Illinois (22.1 percent), Ohio (20.9 percent), Indiana (18.6 percent), and Missouri (18.2 percent)
Among 9,844 U.S. zip codes with at least 2,500 total properties, those with the highest share underwater at the end of Q2 2016 were 63137 in the St. Louis metro area (79.8 percent); 60827 in the Chicago metro area (76.3 percent); 08611 in the Trenton, New Jersey, metro area (75.8 percent); 60419 in the Chicago metro area (74.6 percent); and 48235 in the Detroit metro area (73.3 percent).
Other zip codes with at least two-thirds of properties seriously underwater included zip codes in Milwaukee, Columbus, Ohio, and Las Vegas. There were a total of 29 U.S. zip codes with more than two-thirds of properties seriously underwater as of the end of Q2 2016.
San Jose, San Francisco, Portland post lowest underwater rates
Metro areas with the lowest share of seriously underwater properties were San Jose, California (1.7 percent); San Francisco, California (3.7 percent); Portland, Oregon (3.9 percent); Austin, Texas (3.9 percent); and Oxnard-Thousand Oaks-Ventura, California (4.1 percent);
Other markets with a population of 1 million or more where the share of seriously underwater properties was below 10 percent included Denver (4.1 percent); San Diego (4.8 percent); Los Angeles (5.0 percent); Seattle (5.5 percent); Minneapolis-St. Paul (5.5 percent); Houston (5.7 percent); Dallas-Fort Worth (6.0 percent); San Antonio (6.4 percent), Pittsburgh (7.2 percent), and Sacramento (8.3 percent).
“Since the middle of 2013, the greater Seattle area has seen an impressive 73 percent drop in the number of homes that are seriously underwater,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “We owe this drop to our rapidly expanding economy and very limited supply of homes for sale, which has pushed home prices up dramatically. Given this rapid increase in prices, we’ve seen a 72 percent increase in the number of homes that are now considered equity rich in the Seattle area.”
The ATTOM Data Solutions U.S. Home Equity & Underwater report provides counts of properties based on categories of equity — or loan to value (LTV) — at the state, metro, county and zip code level, along with the percentage of total residential properties with a mortgage that each equity category represents. The equity/LTV calculation is derived from a combination of record-level open loan data and record-level estimated property value data, and is also matched against record-level foreclosure data to determine foreclosure status for each equity/LTV category.
Seriously underwater: Loan to value ratio of 125 percent or above, meaning the homeowner owed at least 25 percent more than the estimated market value of the property.
Equity rich: Loan to value ratio of 50 percent or lower, meaning the homeowner had at least 50 percent equity.
Foreclosures w/equity: Properties in some stage of the foreclosure process (default or scheduled for auction, not including bank-owned) where the loan to value ratio was 100 percent or lower.