RealtyTrac, a source for comprehensive housing data, released its Q2 2015 U.S. Home Equity & Underwater Report, which shows that as of the end of the second quarter there were 7,443,580 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 13.3 percent of all properties with a mortgage.
The second quarter underwater numbers were up from 7,341,922 seriously underwater homes, representing 13.2 percent of all homes with a mortgage, in the previous quarter — making Q2 the second consecutive quarter with a slight increase in both the number and share of seriously underwater properties. Still, that total was down from 9,074,449 seriously underwater properties, representing 17.2 percent of all homes with a mortgage, in the second quarter of 2014. 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.
“Slowing home price appreciation in 2015 has resulted in the share of seriously underwater properties plateauing at about 13 percent of all properties with a mortgage,” RealtyTrac Vice President Daren Blomquist said. “However, the share of homeowners with the double-whammy of seriously underwater properties that are also in foreclosure is continuing to decrease and is now at the lowest level we’ve seen since we began tracking that metric in the first quarter of 2012.”
The share of distressed properties — those in some stage of the foreclosure process — that were seriously underwater at the end of the second quarter was 34.4 percent, down from 35.1 percent in the first quarter of 2015 and down from 43.6 percent in the second quarter of 2014 to the lowest level since tracking began in the first quarter of 2012. Conversely, the share of foreclosures with positive equity increased to 42.4 percent in the second quarter, up slightly from 42.1 percent in the first quarter and up from 34.1 percent in the second quarter of 2014.
The universe of equity-rich mortgaged properties — those with at least 50 percent equity — decreased on a quarter-over-quarter basis for the second straight quarter, down to 10.9 million, representing 19.6 percent of all properties with a mortgage, at the end of the second quarter. That was down from 11.1 million, representing 19.8 percent, at the end of the first quarter and down from 11.3 million, representing 20.3 percent, at the end of the fourth quarter. That still was up from 9.9 million, representing 18.9 percent, at the end of the second quarter of 2014.
“Although the number of equity rich homeowners with a mortgage has increased by 1 million compared to a year ago, that number dropped by nearly 300,000 between the end of 2014 and the middle of 2015,” Blomquist added. “The number of homeowners with a mortgage who have at least 20 percent equity has dropped by more than 900,000 during the past six months, indicating that homeowners who have gained substantial equity thanks to the housing price recovery over the past three years are taking advantage of that newfound equity. Some are leveraging that equity into a higher LTV refinance or a move-up purchase, some may be downsizing into an all-cash purchase and some may be cashing out of homeownership altogether. Those homeowners cashing out of homeownership altogether would explain why the nation’s overall homeownership rate continued to decline in the second quarter even as homeownership rates among millennials increased.”