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11.4 million or 23.7 per cent of all residential properties with a mortgage were in negative equity – when borrowers owe more on their mortgages than their property is worth – according to a new report by Corelogic.This is down from 25.2 per cent of all residential properties in the fourth quarter of last year. And lower than 24.7 per cent in Q1 2011.
The negative equity share is at its lowest in nearly three years.
Here are some details from the report:
- Negative equity declined to $691 billion in the first quarter, from $742 billion in the fourth quarter.
- Over 700,000 households returned to positive equity in the first quarter.
- 2.3 million borrowers had less than 5 per cent equity i.e. were in near-negative equity in the first quarter.
- Negative equity and near-negative equity mortgages accounted for 28.5 per cent of all residential properties in Q1. This is down from 30.1 per cent in Q4.
- Nevada had the highest negative equity percentage with 61 per cent of all mortgaged properties underwater.
- The bulk of negative equity is focused on the low-end of the market. The negative equity for low-to-mid value homes (under $200,000) is at 31 per cent of borrowers, nearly double the 15.9 per cent for borrowers with home values over $200,000.
Decline in home values or an increase in mortgage debt cause an increase in negative equity. Negative equity improved in large part because of an improvement in home price levels.
“In the first quarter of 2012, rebounding home prices, a healthier balance of real estate supply and demand, and a slowing share of distressed sales activity helped to reduce the negative equity share,” said Mark Fleming, chief economist for CoreLogic. “This is a meaningful improvement that is driven by quickly improving outlooks in some of the hardest hit markets.”
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