The percentage of underwater homeowners in the U.S. is quickly shrinking, according to recent reports by RealtyTrac and CoreLogic, which could improve the inventory of homes on the market.
Most recently CoreLogic reports that a sharp rise in home prices helped 2.5 million more mortgage borrowers find equity in their homes once again in the second quarter. By the end of June, only 14.5 percent of mortgage borrowers remained underwater on their loans, compared with 19.7 percent at the end of the first quarter and 26 percent of borrowers owed more on their homes than they were worth four years ago.
RealtyTrac also reports that since May, 600,000 home owners had emerged from being “deeply underwater.”
Mark Fleming, CoreLogic’s chief economist, tells the NAR home-price increases are expected to remain steady in the coming months, likely curtailing the number of home owners who are no longer underwater on their mortgages.
“Equity rebuilding continued in the second quarter of this year as the share of underwater mortgaged homes fell to 14.5 percent,” says Dr. Mark Fleming, chief economist for CoreLogic. “In just the first half of 2013 almost three and a half million homeowners have returned to positive equity, but the pace of improvement will likely slow as price appreciation moderates in the second half.”
CoreLogic’s report says that the number of mortgaged residential properties with equity was at 41.5 million and those still underwater was at 7.1 million. At the end of the previous quarter, 9.6 million homes or 19.7 percent were underwater.
Inventory of homes for sale is low across the country, according to RealtyTrac, but rapidly rising home prices in some markets over the past year has left many homeowners with equity and ready to sell. Rising home prices also means more distressed homeowners now have positive equity and may allow them to avoid foreclosure without resorting to a short sale.
These states had the highest percentage of mortgage borrowers still underwater in the second quarter, according to CoreLogic:
- Nevada: 36.4%
- Florida: 31.5%
- Arizona: 24.7%
- Michigan: 22.5%
- Georgia: 20.7%
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