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Some 9.3 million U.S. residential properties were deeply underwater - worth at least 25 percent less than the combined loans secured by the property - representing 19 percent of all properties with a mortgage in December. That was down from 10.7 million residential properties deeply underwater in September 2013, representing 23 percent of all properties with a mortgage, and down from 10.9 million properties deeply underwater in January 2013, representing 26 percent of all properties with a mortgage.

Rising Values Freed 1.4 Homeowners from Negative Equity in 2013

Some 9.3 million U.S. residential properties were deeply underwater – worth at least 25 percent less than the combined loans secured by the property – representing 19 percent of all properties with a mortgage in December. That was down from 10.7 million residential properties deeply underwater in September 2013, representing 23 percent of all properties with a mortgage, and down from 10.9 million properties deeply underwater in January 2013, representing 26 percent of all properties with a mortgage. The recent peak in negative equity was May 2012, when 12.8 million U.S. residential properties were deeply underwater, representing 29 percent of all properties with a mortgage.

Fewer foreclosures were deeply underwater in December compared to three months earlier. A total of 239,470 residential properties actively in the foreclosure process were worth at least 25 percent less than the combined loans secured by the property, representing 48 percent of all properties in foreclosure. That was 60,000 fewer than in September, when there were 299,773 foreclosure properties deeply underwater, representing 56 percent of all properties in the foreclosure process. Meanwhile, 31 percent of all residential properties in the foreclosure process had some positive equity, up from 24 percent with equity in September.

The universe of equity-rich properties – with at least 50 percent equity – grew during the fourth quarter as well, from 7.4 million representing 16 percent of all residential properties with a mortgage in September, to 9.1 million representing 18 percent of all residential properties with a mortgage in December.

“During the housing downturn we saw a downward spiral of falling home prices resulting in rising negative equity, which in turn put millions of homeowners at higher risk for foreclosure when they encountered a trigger event such as job loss,” said Daren Blomquist, vice president at RealtyTrac. “Now we are seeing the reverse trend: rising home prices resulting in falling negative equity, which in turn is giving millions of homeowners a lifeline to avoid foreclosure when they encounter a trigger event. On the other end of the spectrum, the percentage of equity-rich homeowners is nearing a tipping point that should result in a larger inventory of homes listed for sale and give the overall economy a nice shot in the arm in 2014.

“However, there are still millions of homeowners who are in such a deep equity hole that it will take years for them to regain their equity,” Blomquist added. “The longer these homeowners remain in a negative equity position without relief in the form of a principal loan balance reduction, the more likely that foreclosure will become the path of least resistance for them.”

“With available home inventory and interest rates at all-time lows, we experienced an increased rate of appreciation throughout the Ohio housing market during the fourth quarter of 2013,” said Michael Mahon, executive vice president/broker at HER Realtors, covering the Cincinnati, Columbus and Dayton markets in Ohio. “As we enter 2014, we are expecting the rate of appreciation to outpace what we have experienced the past two years, which will provide consumers the added value and reason to enter the home market in 2014.”

Other high-level findings from the report:

  • States with the highest percentage of residential properties deeply underwater in December were Nevada (38 percent), Florida (34 percent), Illinois (32 percent), Michigan (31 percent), Missouri (28 percent), and Ohio (28 percent).
  • Major metropolitan statistical areas with the highest percentage of residential properties deeply underwater in December were Las Vegas (41 percent), Orlando, Fla., (36 percent), Detroit (35 percent), Tampa, Fla., (35 percent), Miami (33 percent), and Chicago (33 percent).
  • States with the highest percentage of equity-rich residential properties were Hawaii (36 percent), New York (33 percent), California (26 percent), Montana (24 percent), and Maine (24 percent). The District of Columbia also posted an equity-rich rate of 24 percent.
  • Major metropolitan statistical areas with the highest percentage of equity-rich residential properties were San Jose, Calif., (37 percent), San Francisco (33 percent), Pittsburgh (30 percent), Buffalo, N.Y. (30 percent), and Los Angeles (29 percent).
  • States with the highest percentage of deeply underwater residential properties in the foreclosure process included Nevada (65 percent), Florida (61 percent), Illinois (61 percent), Michigan (55 percent), and Ohio (48 percent).
  • Major metro areas with the highest percentage of deeply underwater residential properties in the foreclosure process were Las Vegas (66 percent), Tampa, Fla. (63 percent), Chicago (62 percent), Orlando (61 percent), and Detroit (61 percent).
  • States with the highest percentage of foreclosure properties with some equity included Oklahoma (62 percent), Colorado (54 percent), New York (52 percent), Texas (51 percent) and North Carolina (45 percent).
  • Major metro areas with the highest percentage of foreclosure properties with some equity were Buffalo, N.Y. (74 percent), Pittsburgh (73 percent), Austin (67 percent), Denver (64 percent), and Oklahoma City (63 percent).

“During the housing downturn we saw a downward spiral of falling home prices resulting in rising negative equity, which in turn put millions of homeowners at higher risk for foreclosure when they encountered a trigger event such as job loss,” said Daren Blomquist, vice president at RealtyTrac. “Now we are seeing the reverse trend: rising home prices resulting in falling negative equity, which in turn is giving millions of homeowners a lifeline to avoid foreclosure when they encounter a trigger event. On the other end of the spectrum, the percentage of equity-rich homeowners is nearing a tipping point that should result in a larger inventory of homes listed for sale and give the overall economy a nice shot in the arm in 2014.

“However, there are still millions of homeowners who are in such a deep equity hole that it will take years for them to regain their equity,” Blomquist added. “The longer these homeowners remain in a negative equity position without relief in the form of a principal loan balance reduction, the more likely that foreclosure will become the path of least resistance for them.”

“With available home inventory and interest rates at all-time lows, we experienced an increased rate of appreciation throughout the Ohio housing market during the fourth quarter of 2013,” said Michael Mahon, executive vice president/broker at HER Realtors, covering the Cincinnati, Columbus and Dayton markets in Ohio. “As we enter 2014, we are expecting the rate of appreciation to outpace what we have experienced the past two years, which will provide consumers the added value and reason to enter the home market in 2014.”

Other high-level findings from the report:

  • States with the highest percentage of residential properties deeply underwater in December were Nevada (38 percent), Florida (34 percent), Illinois (32 percent), Michigan (31 percent), Missouri (28 percent), and Ohio (28 percent).
  • Major metropolitan statistical areas with the highest percentage of residential properties deeply underwater in December were Las Vegas (41 percent), Orlando, Fla., (36 percent), Detroit (35 percent), Tampa, Fla., (35 percent), Miami (33 percent), and Chicago (33 percent).
  • States with the highest percentage of equity-rich residential properties were Hawaii (36 percent), New York (33 percent), California (26 percent), Montana (24 percent), and Maine (24 percent). The District of Columbia also posted an equity-rich rate of 24 percent.
  • Major metropolitan statistical areas with the highest percentage of equity-rich residential properties were San Jose, Calif., (37 percent), San Francisco (33 percent), Pittsburgh (30 percent), Buffalo, N.Y. (30 percent), and Los Angeles (29 percent).
  • States with the highest percentage of deeply underwater residential properties in the foreclosure process included Nevada (65 percent), Florida (61 percent), Illinois (61 percent), Michigan (55 percent), and Ohio (48 percent).
  • Major metro areas with the highest percentage of deeply underwater residential properties in the foreclosure process were Las Vegas (66 percent), Tampa, Fla. (63 percent), Chicago (62 percent), Orlando (61 percent), and Detroit (61 percent).
  • States with the highest percentage of foreclosure properties with some equity included Oklahoma (62 percent), Colorado (54 percent), New York (52 percent), Texas (51 percent) and North Carolina (45 percent).
  • Major metro areas with the highest percentage of foreclosure properties with some equity were Buffalo, N.Y. (74 percent), Pittsburgh (73 percent), Austin (67 percent), Denver (64 percent), and Oklahoma City (63 percent).

December 2013 Home Equity and Underwater Data

State

Deeply Underwater Total

Deeply Underwater Pct

Equity Rich Total

Equity Rich Pct

Foreclosures Deeply Underwater Pct

Foreclosure w/Equity Pct

U.S. Total

9,274,126

19%

9,097,325

18%

48%

31%

Alabama

40,517

16%

39,433

15%

31%

33%

Alaska

3,642

5%

11,684

16%

0%

0%

Arizona

402,832

23%

279,064

16%

46%

31%

Arkansas

21,821

13%

25,791

15%

0%

0%

California

1,198,229

16%

1,965,974

26%

39%

38%

Colorado

117,775

10%

187,223

15%

21%

54%

Connecticut

88,363

21%

64,238

15%

43%

33%

Delaware

37,835

20%

36,558

20%

41%

31%

District of Columbia

16,685

14%

29,329

24%

0%

0%

Florida

1,773,642

34%

780,598

15%

61%

21%

Georgia

237,704

23%

155,894

15%

46%

35%

Hawaii

19,421

8%

88,489

36%

22%

59%

Idaho

16,402

11%

24,824

17%

19%

50%

Illinois

774,538

32%

298,180

12%

61%

20%

Indiana

60,227

14%

70,193

16%

26%

44%

Iowa

23,378

11%

37,656

17%

20%

48%

Kansas

177

5%

587

17%

Kentucky

6,368

11%

7,830

14%

Louisiana

26,353

16%

25,709

15%

21%

52%

Maine

2,915

7%

10,312

24%

0%

65%

Maryland

281,783

20%

249,106

17%

43%

31%

Massachusetts

85,203

13%

136,371

20%

33%

39%

Michigan

414,629

31%

192,244

14%

55%

30%

Minnesota

60,709

9%

130,281

20%

17%

58%

Mississippi

417

3%

2,902

23%

Missouri

232,635

28%

89,663

11%

54%

23%

Montana

3,430

5%

15,977

24%

Nebraska

23,042

10%

32,178

14%

0%

47%

Nevada

282,261

38%

72,239

10%

65%

19%

New Hampshire

18,809

13%

22,460

16%

28%

45%

New Jersey

236,925

20%

215,710

18%

45%

30%

New Mexico

37,372

15%

34,576

14%

28%

37%

New York

191,247

11%

596,058

33%

26%

52%

North Carolina

147,765

11%

212,785

16%

22%

45%

North Dakota

1,246

5%

5,203

21%

Ohio

552,277

28%

230,715

12%

48%

27%

Oklahoma

38,763

10%

52,215

14%

12%

62%

Oregon

93,461

12%

162,324

20%

22%

46%

Pennsylvania

295,252

16%

398,093

21%

32%

43%

Rhode Island

28,301

24%

19,403

17%

53%

0%

South Carolina

93,791

14%

102,986

16%

24%

43%

Tennessee

157,304

14%

188,956

16%

24%

44%

Texas

400,677

11%

523,902

14%

19%

51%

Utah

81,671

15%

69,611

12%

29%

37%

Vermont

440

6%

1,655

23%

Virginia

115,205

11%

187,916

19%

28%

40%

Washington

242,190

15%

275,665

17%

37%

31%

West Virginia

777

6%

1,659

13%

Wisconsin

79,546

14%

113,123

20%

32%

40%

Wyoming

1,461

6%

5,313

21%

0%

0%

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