Negative equity, which remains “stubbornly high” as the economy slowly improves, is concentrated among lower valued properties in foreclosure and in properties valued between $100,000 and $200,000 reported CoreLogic in its monthly US Housing and Mortgage Trends Report.
As of Q4 2010, over 11 million or 23 percent of borrowers were in a negative equity position and the level has been stable over the past year. Aggregate negative equity was $750 billion as of Q4 2010, of which $355 billion is composed of 1st liens alone and $395 billion is composed of 1st liens that have one or more junior liens.
Demand remains weak but the weakness in the housing market is not limited to sales but also to supply. Supply includes visible supply of inventory on MLS systems and the current shadow supply which is typically not included in the MLS unsold inventory.
As of January 2011, CoreLogic estimated the shadow inventory fell to 1.8 million units, down from 2.0 million from a year ago. In addition, there are nearly 2 million non-delinquent or current negative equity loans that are more than 50 percent upside down that will likely become shadow supply in the near future.
The lack of home equity has prevented borrowers from re?nancing or selling and left many homeowners vulnerable to default in the event of adverse economic shocks such as unemployment, divorce, a major medical event or an increase in monthly mortgage payments, CoreLogic said. Signi?cant levels of negative home equity also have increased the probability of borrowers strategically defaulting.