As home prices continued to rise in 2015, the number of homeowners who have seen equity growing in their homes continued to grow as well.
CoreLogic announced that its latest look at the market at the end of 2015 showed that 91.5 percent of all properties with a mortgage had some equity, with more than 80 percent holding at least 20 percent equity in their homes.
“The number of homeowners with more than 20 percent equity is rising rapidly,” CoreLogic President and CEO Anand Nallathambi said in a news release. “Higher prices driven largely by tight supply are certainly a big reason for the rise, but continued population growth, household formation and ultralow interest rates are also factors. Looking ahead in 2016, we expect home equity levels to continue to build, which is a good thing for the long-term health of the U.S. economy.”
The analysis showed 1 million borrowers regained equity in 2015, with the total now at 46.3 million at the end of 2015. Nationwide, borrower equity increased by $682 billion in the fourth quarter of 2015 from a year earlier.
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.
Of the more than 50 million residential properties with a mortgage, 18.9 percent have less than 20 percent equity (referred to as “under-equitied”) and 2.3 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 moving into negative equity if home prices fall.
“The improvement in equity reflects positive home prices and continued deleveraging of mortgage balances by households,” CoreLogic chief economist Frank Nothaft said.
Among the highlights of the report for the fourth quarter are:
- Nevada had the highest percentage of mortgaged residential properties in negative equity at 18.7 percent, followed by Florida (17.1 percent), Illinois (14.6 percent), Arizona (14 percent), and Rhode Island (13.5 percent). These top five states combined account for 30.8 percent of negative equity in the U.S., but only 16.5 percent of outstanding mortgages.
- Texas had the highest percentage of mortgaged residential properties in positive equity at 98 percent, followed by Alaska (97.6 percent), Hawaii (97.6 percent), Montana (97.3 percent) and Colorado (97.1 percent).
- Of the total $311 billion in negative equity nationally, first liens without home equity loans accounted for $171 billion, or 55 percent, in aggregate negative equity, while first liens with home equity loans accounted for $140 billion, or 45 percent.
- Approximately 2.6 million underwater borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $240,000 and the average underwater amount is $65,000.
- Approximately 1.7 million underwater borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $304,000 and the average underwater amount is $82,000.