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The number of homeowners who owe more in their mortgages than they are worth fell by 5.8 percent in the first quarter and nearly a full point from a year ago as rising values pushed nearly three quarters of a million homeowners into the black in the first quarter, and today the total may exceed one million.

Rising Values Push Nearly One Million Homeowners Above Water

The number of homeowners who owe more in their mortgages than they are worth fell by 5.8 percent in the first quarter and nearly a full point from a year ago as rising values pushed nearly three quarters of a million homeowners into the black in the first quarter, and today the total may exceed one million.

Owners’ equity has gained sharply, according to Federal Reserve data reported Friday by HUD in its monthly Housing Scoreboard. Home equity rose by $457.1 billion in the first quarter of 2012, a 7.4 percent increase from the previous quarter and its highest level since the second quarter of 2010, the height of price increases stimulated by the federal homebuyer tax credits in the second quarter of 2010.

The government data confirmed last month’s report from CoreLogic that the number homeowners underwater in the first quarter fell to 11.4 million, down from 12.1 million in last quarter of 2011. CoreLogic reported that only 23.7 percent, of all homeowners with a mortgage were in negative equity compared to 25.2 percent, in the fourth quarter of 2011.

The first quarter negative equity share is lower than it has been since CoreLogic began reporting it in third quarter of 2009, which was nine months before the peak of the tax credits. The actually number of underwater borrowers is now within 200,000 of the level in late 2009, 11.1 million owners.

“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. While the overall stagnating economic recovery will likely slow housing market recovery in the second half of this year, reducing the number of households is an important step toward reducing future mortgage default risk.”

Since the housing crash in 2006, record negative equity rates have frozen millions in their homes, making it difficult to sell or refinance and forcing those suffering financial reversals into foreclosure. Negative equity has played a major role in the current low inventory levels, preventing owners from selling their homes to take advantage of improving market conditions. Loss of equity has crippled net worth and curtailed retirement plans. Homes made up 47.6 percent of the total non-financial assets held by Americans in 2009 and household net worth declined 40 percent from 2007 to 2010 due to a decline housing prices.

Since the end of the first quarter, prices increases have continued, pushing even more homeowners into the black. All national prices indices have continued to rise, including Case-Shiller, which has reported increases in April and May. According to CoreLogic, some 1.9 million of the 11.4 million borrowers underwater in the first quarter were within five percent of reaching positive equity.

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