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The number of homeowners with underwater mortgages fell by 600,000 in the second quarter, according to the latest report from CoreLogic.And 1.3 million homeowners were lifted out of negative equity from the start of the year.
10.8 million of 22.3 per cent of all residential mortgages were in negative equity – when homeowners owe more on their mortgage than their home is worth – in the second quarter.
This compares with 11.4 million or 23.7 per cent.
Some highlights from the report:
- Negative equity across the country fell to $689 billion at the end of the second quarter, compared to $691 billion at the end of the first quarter.
- Underwater mortgages and near-negative equity mortgages account for 27 per cent of all mortgages, down from 28.5 per cent in the first quarter.
- Nevada, Florida and Arizona are the three states with the highest negative equity. 59 per cent of households are in negative equity in Nevada, 43 per cent in Florida, and 40 per cent in Arizona.
- “The bulk of negative equity is concentrated in the low end of the housing market. For example, for low-to-mid value homes (less than $200,000), the negative equity share is 32 per cent, almost twice the 17 per cent for borrowers with home values greater than $200,000.”
Rising home prices and lower housing inventory have contributed to the lower portion of negative equity.
“Nearly 2 million more borrowers in negative equity would be above water if house prices nationally increased by 5 per cent,” said Anand Nallathambi, president and CEO of CoreLogic.
This is another positive for the U.S. housing market that is seeing a slow and bumpy recovery, since those with mortgages in negative equity are more likely to default on their mortgages and send home prices lower.
This chart shows the negative equity share across the country:
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