The proportion of homeowners with negative or near equity in their homes declined in the second quarter of the year with 600,000 borrowers reaching a state of positive equity during the quarter making a total of 1.3 million so far this year. Negative equity refers to a mortgage with a balance greater than the value of the home. CoreLogic released a report Wednesday morning showing that 10.8 million homeowners, or 22.3 percent of those with a mortgage, were underwater at the end of the quarter, down from 11.4 million or 23.7 percent at the end of the first quarter. An additional 2.3 borrowers* were classed as near-negative with less than 5 percent equity in their home. Twenty-seven percent of all mortgaged homes nationwide had negative and near-negative equity mortgages at the end of the second quarter compared to 28.5 percent a quarter earlier.
“The level of negative equity continues to improve with more than 1.3 million households regaining a positive equity position since the beginning of the year,” said Mark Fleming, chief economist for CoreLogic. “Surging home prices this spring and summer, lower levels of inventory, and declining REO sale shares are all contributing to the nascent housing recovery and declining negative equity.”
“Nearly 2 million more borrowers in negative equity would be above water if house prices nationally increased by 5 percent,” said Anand Nallathambi, president and CEO of CoreLogic. “We currently expect home prices to continue to trend up in August. Were this trend to be sustained we could see significant reductions in the number of borrowers in negative equity by next year.”