SOURCE: RealtyTrac

RealtyTrac

January 09, 2014 00:01 ET

9.3 Million U.S. Residential Properties Deeply Underwater in December 2013, Down From 10.7 Million in September 2013

Also Down From 10.9 Million in January 2013 and Peak of 12.8 Million in May 2012; 31 Percent of Residential Properties in Foreclosure Process Now Have Some Equity

IRVINE, CA--(Marketwired - Jan 9, 2014) - RealtyTrac® (www.realtytrac.com), the nation's leading source for comprehensive housing data, today released its U.S. Home Equity & Underwater Report for December 2013, which shows that 9.3 million U.S. residential properties were deeply underwater -- worth at least 25 percent less than the combined loans secured by the property -- representing 19 percent of all properties with a mortgage in December.

That was down from 10.7 million residential properties deeply underwater in September 2013, representing 23 percent of all properties with a mortgage, and down from 10.9 million properties deeply underwater in January 2013, representing 26 percent of all properties with a mortgage. The recent peak in negative equity was May 2012, when 12.8 million U.S. residential properties were deeply underwater, representing 29 percent of all properties with a mortgage.

Fewer foreclosures were deeply underwater in December compared to three months earlier. A total of 239,470 residential properties actively in the foreclosure process were worth at least 25 percent less than the combined loans secured by the property, representing 48 percent of all properties in foreclosure. That was 60,000 fewer than in September, when there were 299,773 foreclosure properties deeply underwater, representing 56 percent of all properties in the foreclosure process. Meanwhile, 31 percent of all residential properties in the foreclosure process had some positive equity, up from 24 percent with equity in September.

The universe of equity-rich properties -- with at least 50 percent equity -- grew during the fourth quarter as well, from 7.4 million representing 16 percent of all residential properties with a mortgage in September, to 9.1 million representing 18 percent of all residential properties with a mortgage in December.

"During the housing downturn we saw a downward spiral of falling home prices resulting in rising negative equity, which in turn put millions of homeowners at higher risk for foreclosure when they encountered a trigger event such as job loss," said Daren Blomquist, vice president at RealtyTrac. "Now we are seeing the reverse trend: rising home prices resulting in falling negative equity, which in turn is giving millions of homeowners a lifeline to avoid foreclosure when they encounter a trigger event. On the other end of the spectrum, the percentage of equity-rich homeowners is nearing a tipping point that should result in a larger inventory of homes listed for sale and give the overall economy a nice shot in the arm in 2014.

"However, there are still millions of homeowners who are in such a deep equity hole that it will take years for them to regain their equity," Blomquist added. "The longer these homeowners remain in a negative equity position without relief in the form of a principal loan balance reduction, the more likely that foreclosure will become the path of least resistance for them."

"With available home inventory and interest rates at all-time lows, we experienced an increased rate of appreciation throughout the Ohio housing market during the fourth quarter of 2013," said Michael Mahon, executive vice president/broker at HER Realtors, covering the Cincinnati, Columbus and Dayton markets in Ohio. "As we enter 2014, we are expecting the rate of appreciation to outpace what we have experienced the past two years, which will provide consumers the added value and reason to enter the home market in 2014."

Other high-level findings from the report:

  • States with the highest percentage of residential properties deeply underwater in December were Nevada (38 percent), Florida (34 percent), Illinois (32 percent), Michigan (31 percent), Missouri (28 percent), and Ohio (28 percent).

  • Major metropolitan statistical areas with the highest percentage of residential properties deeply underwater in December were Las Vegas (41 percent), Orlando, Fla., (36 percent), Detroit (35 percent), Tampa, Fla., (35 percent), Miami (33 percent), and Chicago (33 percent).

  • States with the highest percentage of equity-rich residential properties were Hawaii (36 percent), New York (33 percent), California (26 percent), Montana (24 percent), and Maine (24 percent). The District of Columbia also posted an equity-rich rate of 24 percent.

  • Major metropolitan statistical areas with the highest percentage of equity-rich residential properties were San Jose, Calif., (37 percent), San Francisco (33 percent), Pittsburgh (30 percent), Buffalo, N.Y. (30 percent), and Los Angeles (29 percent).

  • States with the highest percentage of deeply underwater residential properties in the foreclosure process included Nevada (65 percent), Florida (61 percent), Illinois (61 percent), Michigan (55 percent), and Ohio (48 percent).

  • Major metro areas with the highest percentage of deeply underwater residential properties in the foreclosure process were Las Vegas (66 percent), Tampa, Fla. (63 percent), Chicago (62 percent), Orlando (61 percent), and Detroit (61 percent).

  • States with the highest percentage of foreclosure properties with some equity included Oklahoma (62 percent), Colorado (54 percent), New York (52 percent), Texas (51 percent) and North Carolina (45 percent).

  • Major metro areas with the highest percentage of foreclosure properties with some equity were Buffalo, N.Y. (74 percent), Pittsburgh (73 percent), Austin (67 percent), Denver (64 percent), and Oklahoma City (63 percent).

Report methodology
The RealtyTrac U.S. Home Equity & Underwater report provides counts of residential properties based on several categories of equity -- or loan to value (LTV) -- at the state, metro and county level, along with the percentage of total residential properties with a mortgage that each equity category represents. The equity/LTV calculation is derived from a combination of record-level open loan data and record-level estimated property value data, and is also matched against record-level foreclosure data to determine foreclosure status for each equity/LTV category.

Definitions
Deeply underwater: Loan to value ratio of 125 percent or above, meaning the homeowner owed at least 25 percent more than the estimated market value of the property.

Equity Rich: Loan to value ratio of 50 percent or lower, meaning the homeowner had at least 50 percent equity.

Foreclosures w/Equity: Properties in some stage of the foreclosure process (default or scheduled for auction, not including bank-owned) where the loan to value ratio was 100 percent or lower.

Report License 
The RealtyTrac U.S. Foreclosure Market Report is the result of a proprietary evaluation of information compiled by RealtyTrac; the report and any of the information in whole or in part can only be quoted, copied, published, re-published, distributed and/or re-distributed or used in any manner if the user specifically references RealtyTrac as the source for said report and/or any of the information set forth within the report.

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About RealtyTrac Inc.
RealtyTrac (www.realtytrac.com) is the leading supplier of U.S. real estate data, with more than 1.5 million active default, foreclosure auction and bank-owned properties, and more than 1 million active for-sale listings on its website, which also provides essential housing information for more than 100 million homes nationwide. This information includes property characteristics, tax assessor records, bankruptcy status and sales history, along with 20 categories of key housing-related facts provided by RealtyTrac's wholly-owned subsidiary, Homefacts®. RealtyTrac's foreclosure reports and other housing data are relied on by the Federal Reserve, U.S. Treasury Department, HUD, numerous state housing and banking departments, investment funds as well as millions of real estate professionals and consumers, to help evaluate housing trends and make informed decisions about real estate.