Home price appreciation throughout the country has decreased the numbers of borrowers underwater on their mortgages while increasing the amount of equity available to homeowners, according to Black Knight Financial Services, Inc.
Black Knight’s Mortgage Monitor Report found that the number of underwater borrowers declined by 16 percent in the first quarter of 2017, and that 350,000 borrowers regained equity during that period, decreasing the total underwater population to 1.8 million.
“The steady upward trajectory of home prices continues to improve the equity positions of many homeowners,” Black Knight Data & Analytics Executive Vice President Ben Graboske said in a release. “This is plainly visible in the number of borrowers who are underwater on their mortgages, owing more than their homes are worth.
“Over the past year, we’ve seen a 35 percent decline in the total underwater population, with a 16 percent decline in that population over the first three months of 2017 alone,” Graboske added. “Home prices rose 2.3 percent in the first quarter, as compared to 1.8 percent over the same period last year, helping an additional 350,000 borrowers regain equity in their homes. As of today, there are 1.8 million underwater borrowers remaining, the first time this population has fallen below two million since 2006.
Many of the homeowners with underwater properties own homes in the lowest price tiers.
“As has been the case for some time now, negative equity has become more and more a localized phenomenon. But it’s also becoming concentrated among a particular class of homeowner,” Graboske said.
“Nearly half of all borrowers who remain underwater own homes in the lowest 20 percent of prices in their respective markets. While the nation as a whole now has a negative equity rate of just 3.6 percent, among owners in that lowest price tier, it’s over eight percent. In fact, these lowest-price-tier properties are more than twice as likely to be underwater as those in the next price tier up, and 6.5 times more likely to be underwater than those living in the top 20 percent of the market.
Rising home prices are also increasing the amount of equity available for homeowners. The report said total tappable (or lendable) equity increased by $695 billion dollars over the last year for borrowers with at least 20 percent equity in their homes.
“Over 40 million Americans with a mortgage now have tappable equity available in their homes,” Graboske said. “This is the largest this population has ever been. Growth over the last year brought the total lendable equity market to just under $5 trillion as of the end of Q1 2017.
“If home prices continue to rise at or near their current rate of appreciation, tappable equity will likely hit record highs by this summer,” Graboske added.
The report identified Mississippi, Louisiana, Alabama, West Virginia and Maine as the states with the highest percentage of non-current loans. Oregon, Idaho, Minnesota, North Dakota and Colorado had the lowest percentage of non-current loans.