CoreLogic released a new analysis showing 548,000 U.S. homeowners regained equity in the second quarter 2016 compared with the first, increasing the percentage of homes with positive equity to 92.9 percent of all mortgaged properties, or approximately 47.2 million homes. Nationwide, home equity grew year-over-year by $646 billion, representing an increase of 9.9 percent in Q2 2016 compared with Q2 2015.
In Q2 2016, the total number of mortgaged residential properties with negative equity stood at 3.6 million, or 7.1 percent of all homes with a mortgage. This is a decrease of 13.2 percent quarter-over-quarter and a decrease of 19 percent year-over-year.
Negative equity, often referred to as “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or a combination of both.
For homes in negative equity status, the national aggregate value of negative equity was $284 billion at the end of Q2 2016, down 6.7 percent from Q1. On a year-over-year basis, the value of negative equity declined 9.5 percent.
Of the more than 50 million homes with a mortgage, approximately 8.6 million, or 17 percent, have less than 20 percent equity (referred to as under-equitied) and approximately 965,000, or 1.9 percent, have less than 5 percent equity (referred to as near-negative equity). Borrowers who are under-equitied may have a difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints. Borrowers with near-negative equity are considered at risk of shifting into negative equity if home prices fall.
“Home-value gains have played a large part in restoring home equity,” CoreLogic Chief Economist Dr. Frank Nothaft said in a press release. “The CoreLogic Home Price Index for the U.S. recorded 5.2 percent growth in the year through June, an important reason that the number of owners with negative equity fell by 850,000 in the second quarter from a year earlier.”
“We see home prices rising another 5 percent in the coming year based on the latest projected national CoreLogic Home Price Index,” CoreLogic CEO Anand Nallathambi said. “Assuming this growth is uniform across the U.S., that should release an additional 700,000 homeowners from the scourge of negative equity.”