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IRVINE, CA—A total of 15%, or 8.1 million, of US residential properties with a mortgage is seriously underwater as of the third quarter of the year, representing $1.4 trillion in negative equity, according to a new report from RealtyTrac. RealtyTrac defines seriously underwater as situations where the combined loan amount secured by the property is at least 25% higher than the property's estimated market value.

The firm says this is the lowest level of seriously underwater properties in two years. In addition, the universe of equity-rich properties—those with at least 50% equity—grew to 10.8 million, representing 20% of all properties with mortgage in the third quarter, up from 9.9 million representing 19% of  properties with a mortgage in the second quarter. Collectively, these equity-rich homeowners have an estimated $2.4 trillion in positive equity.

According to Daren Blomquist, VP of RealtyTrac, the underwater numbers are encouraging, but the negative-equity amount is still concerning. “The decrease in underwater properties is promising, but the estimated $1.4 trillion in negative equity means that the flood waters are not receding as quickly as they were before, corresponding to slowing home-price appreciation. Slower price appreciation means the 8 million homeowners seriously underwater could still have a long road back to positive equity.”

Blomquist adds that RealtyTrac “wanted to paint a picture of the typical seriously underwater homeowner, and what we found was that homeowners who bought or refinanced during the housing bubble (2004 to 2008) own a home worth less than $200,000, live in the Sun Belt or Rust Belt and live in a Democratic Congressional district were more likely to be seriously underwater. On the other hand, the highest percentages of equity-rich homeowners were those who bought or refinanced between 1994 and 1998; those with properties valued at $500,000 or more; live in New York, California or DC; and these folks also tend to live in Democratic Congressional districts.”

When asked about the dichotomy between those homeowners who are seriously underwater and those who are equity rich both living in Democratic Congressional districts, Blomquist tells GlobeSt.com, “This dichotomy is the result of the Democratic districts tending to be in more densely populated areas where the housing boom and bust hit harder, while the Republican districts tend to be in more rural areas where home prices did not swing so wildly over the past few years and also have not bounced back as quickly during the recent recovery. The housing markets in the more densely populated Democratic districts tend to be more volatile when it comes to home price trends.”

As GlobeSt.com reported last week, RealtyTrac has released a 2014 Election Housing Scorecard report analyzing the health of local housing markets in more than 1,500 counties nationwide compared with two years ago and predicting US Senate race outcomes based on the results.

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