According to a new report from real estate data and analytics provider CoreLogic, 8.2 percent of Massachusetts homes were underwater in the third quarter of 2014, with an additional 1.9 percent in near-negative equity. That puts the Bay State in the middle of the pack for underwater homes, ranking 26th among all states and the District of Colombia.
Nationally, nearly 273,000 U.S. homes returned to positive equity in the third quarter of 2014, bringing the total number of mortgaged residential properties with equity to approximately 44.6 million, or 90 percent of all mortgaged properties, according to CoreLogic.
Borrower equity nationwide increased year over year by approximately $800 billion in Q3 2014. The CoreLogic analysis indicates that approximately 5.1 million homes, or 10.3 percent of all residential properties with a mortgage, were still in negative equity, or underwater, as of Q3 2014. That’s down slightly from Q2 2014, when 5.4 million homes, or 10.9 percent, were underwater, and a significant decline compared to the same period last year, when 13.3 percent, or 6.5 million homes, were in negative equity.
Of the 44.6 million residential properties with positive equity, approximately 9.4 million, or 19 percent, have less than 20-percent equity (referred to by CoreLogic as under-equitied) and 1.3 million of those have less than 5-percent equity (referred to as near-negative equity).
Borrowers who are under-equitied may have a more 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 going underwater if home prices fall. In contrast, if home prices rose by as little as 5 percent, an additional 1 million homeowners now underwater would return to positive equity.
"Nationally, the negative equity share is down over three percentage points over the past year. Declines were concentrated in a handful of states, such as Nevada, Georgia, Michigan and Florida," Sam Khater, deputy chief economist for CoreLogic, said in a statement. "Forecasted house price appreciation of about five percent over the next year suggests that negative equity should be at about 8 percent a year from now, still above average, but approaching the pre-crisis level."
Nevada had the highest percentage of underwater mortgaged properties at 25.4 percent, followed by Florida (23.8 percent), Arizona (19 percent), Rhode Island (14.8 percent) and Illinois (14.1 percent). These top five states together account for 33.1 percent of negative equity in the United States.
Of the total $338 billion in negative equity, first liens without home equity loans accounted for $178 billion, or 53 percent, aggregate negative equity, while first liens with home equity loans accounted for $160 billion, or 47 percent.
Approximately 3 million underwater borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $230,000. The average underwater amount is $58,000.
Approximately 2.1 million underwater borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $299,000.The average underwater amount is $78,000.
The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 94 percent of homes valued at greater than $200,000 have equity compared with 85 percent of homes valued at less than $200,000.
Editor’s Notes: This story has been updated since it was first published on Jan. 8.
