Underwater Properties Down, Decrease From Peak

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IRVINE, CA—The number and share of seriously underwater homeowners at the end of the fourth quarter of 2014 were both at their lowest levels since RealtyTrac began tracking home equity trends in the first quarter of 2012. The firm reports that at the end of the year, there were 7,052,570 US residential properties seriously underwater, representing 13% of all properties with a mortgage.

RealtyTrac defines seriously underwater properties as those where the combined loan amount secured by the property is at least 25% higher than the property's estimated market value. The number and share of seriously underwater homes are down from a peak of 12.8 million seriously underwater homeowners representing 29% of all homeowners with a mortgage in the second quarter of 2012.

According to Daren Blomquist, VP of RealtyTrac, “Median home prices nationwide bottomed out in March 2012, and since then have increased 35%, lifting 5.8 million homeowners out of seriously underwater territory. While the remaining seriously underwater properties continue to be a millstone around the neck of some local markets, the growing number of equity-rich homeowners should help counteract the downward pull of negative equity in many markets, empowering those housing markets—and by extension their local economies—to walk on water in 2015.”

The Las Vegas-Paradise, NV, market led the country in fourth-quarter 2014 with the greatest percentage of seriously underwater homeowners, but Florida had the most markets that fell into this category. Blomquist tells GlobeSt.com, “Many of those markets got into a deeper home-equity hole than most markets across the country, with home prices dropping 50% to 60% from peak to trough (whereas nationwide home prices dropped 41% peak to trough. So, now those markets have a deeper home-equity hole to climb out of, and it is just taking longer for them to do that. But we are seeing improvement even in these markets with high negative equity.”

As GlobeSt.com reported in October 2014, a total of 15%, or 8.1 million, of US residential properties with a mortgage were seriously underwater as of the third quarter of 2014, representing $1.4 trillion in negative equity, according to a report from RealtyTrac.

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