RealtyTrac released its Q3 2015 U.S. Home Equity & Underwater Report, which shows that as of the end of the third quarter there were 6,917,673 U.S. residential properties that were seriously underwater — where the combined loan amount secured by the property is at least 25 percent higher than the property’s estimated market value — representing 12.7 percent of all properties with a mortgage.
The third quarter underwater numbers were down from 7,443,580 seriously underwater homes representing 13.3 percent of all homes with a mortgage in the previous quarter. Third quarter totals are at the lowest level for both total mortgages and share of mortgages since RealtyTrac began tracking underwater data in the first quarter of 2012. The number and share of seriously underwater homes peaked in the second quarter of 2012 at 12,824,729 seriously homes representing 28.6 percent of all homes with a mortgage.
As of the end of the third quarter there were 10,476,259 U.S. residential properties that were equity rich — with at least 50 percent equity — 19.2 percent of all properties with a mortgage. That was down from 10,963,041 equity rich properties representing 19.6 percent of all properties with a mortgage in the second quarter and down from 10,812,968 equity rich properties representing 20.1 percent of all properties with a mortgage in the third quarter of 2014.
“After a lull late last year and early this year, home sales volume and average sales prices picked up dramatically again in the second and third quarters of this year, resulting in a substantial drop in seriously underwater homeowners,” RealtyTrac Vice President Daren Blomquist said. “On the other hand, the number and share of equity rich homeowners also dropped dramatically between the second and third quarters — continuing a trend from the previous two quarters — evidence that more homeowners in this category are leveraging their equity through a refinance, move-up sale or by completely cashing out of the housing market.”
One-third in foreclosure are seriously underwater
The share of distressed properties — those in some stage of the foreclosure — that were underwater at the end of the third quarter were also at the lowest level since the first quarter of 2012. As of the end of the third quarter, 33.4 percent of distressed properties were seriously underwater, down 1 percent from the previous quarter and down 5.5 percent year-over-year. Conversely, the share of properties in foreclosure with positive equity increased to 43.4 percent in the third quarter, up slightly from 42.4 percent in the second quarter and up from 38.5 percent in the third quarter of 2014.
Homes with a higher estimated value less likely to be seriously underwater
Among properties with an estimated market value under $200,000, 20.2 percent were seriously underwater, while only 5 percent of properties with a value exceeding $750,000 were seriously underwater. On the other end of the spectrum, 14.3 percent of properties valued under $200,000 were equity rich, while 38.0 percent of properties valued over $750,000 were equity rich.
Homes owned 5-10 years most likely to be seriously underwater
Among residential properties with a mortgage that have been owned between five and 10 years, 17.2 percent are seriously underwater — the highest share of any years owned range analyzed by RealtyTrac.
On the other end of the spectrum, 39.3 percent of homes owned 20 years or more are equity rich — the highest equity rich share of any years owned range analyzed by RealtyTrac.
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