Underwater Share Up First Time Since '12

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IRVINE, CA—Homeowners nationwide with more than 20% equity have been cashing out in some markets, while seriously underwater homes are increasing, according to a report from RealtyTrac. At the end of the first quarter of 2015, the share of seriously underwater homeowners increased 0.4 percentage points from Q4 2014—the first quarterly increase since the second quarter of 2012, but still down more than 4 percentage points from a year ago, the report says.

The total number of US residential properties that were seriously underwater—which RealtyTrac defines as cases where the combined loan amount secured by the property is at least 25% higher than the property's estimated market value—was just higher than 7.3 million, representing 13.2% of all properties with a mortgage. According to Daren Blomquist, VP of RealtyTrac, “At the end of 2014, we saw the lowest share of seriously underwater properties since we began tracking such data, but in the first quarter that share bumped up slightly as home price appreciation continued to slow down in many markets. In addition, the data indicates more owners who have regained equity listed and sold their homes in the first quarter, cashing out on some of the home equity on the table in the US housing market. The biggest change in the equity landscape nationwide was in the category of homeowners with between 20% and 50% equity, which saw a net decrease of nearly half a million between the end of the fourth quarter and the end of the first quarter.”

Meanwhile, Blomquist adds, “most of the seriously underwater homeowners are still stuck in their homes as short sales and other foreclosure alternatives love momentum, tilting the national home-equity scales back slightly toward a higher share of negative equity.”

Blomquist tells GlobeSt.com, “The share of seriously underwater homes ticked up in the first quarter primarily because home price appreciation has slowed down. Although still up on a year-over-year basis, median home sales prices actually decreased on a month-over-month basis in January and February (we don't have the complete March sales data yet). In addition, the data suggests that homeowners with at least 20% equity are starting to sell, but not all of them are buying back into the market. The raw number of homeowners with 20% equity or more decreased by more than 600,000 between the fourth quarter and the first quarter, but the number of homeowners with between 0% and 20% equity (where you would expect these sellers to land when they buy back into the market, assuming they are 'moving up') only increased by about 300,000, leaving a deficit of 300,000 homeowners who presumably cashed out of the market but at least as of yet have not yet bought back into the market. This removal of a lot of positive-equity homeowners also helped tipped the balances more toward a higher share of negative equity.”

As GlobeSt.com reported in January, 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 reported 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.

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