Written by The Business Journal Staff
A new analysis released today by real estate tracking firm CoreLogic shows 1 million borrowers across the country regained equity in 2015, bringing the total number of mortgaged U.S. residential properties with equity at the end of Q4 2015 to approximately 46.3 million, or 91.5 percent of all mortgaged properties.
Nationwide, borrower equity increased year over year by $682 billion in Q4 2015, according to the report, which also indicates approximately 120,000 properties lost equity in the fourth quarter of 2015 compared to the third quarter of 2015.
The total number of mortgaged residential properties with negative equity stood at 4.3 million, or 8.5 percent, in Q4 2015. This is an increase of 2.9 percent quarter over quarter from 4.2 million homes, or 8.3 percent, in Q3 2015 and a decrease of 19.1 percent year over year from 5.3 million homes, or 10.7 percent, compared with Q4 2014.
In Fresno, 24,455, or 16.2 percent, of all residential properties with a mortgage were in negative equity as of Q4 2015 compared with 28,792, or 19.1 percent, in Q4 2014 and 23,332, or 15.4 percent, in Q3 2015. An additional 4,481 properties, or 3.0 percent, were in near-negative equity for Q4 2015 compared with 4,723, or 3.1 percent, in Q4 2014 and 4,198, or 2.8 percent, in Q3 2015.
In the Visalia-Porterville area, 8,183, or 11.8 percent, of all residential properties with a mortgage were in negative equity as of Q4 2015 compared with 11,774, or 17.1 percent, in Q4 2014 and 8,330, or 12.0 percent, in Q3 2015. An additional 1,886 properties, or 2.7 percent, were in near-negative equity for Q4 2015 compared with 2,329, or 3.4 percent, in Q4 2014 and 1,935, or 2.8 percent, in Q3 2015.
Negative equity, often referred to as “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or a combination of both.
For the homes in negative equity status, the national aggregate value of negative equity was $311 billion at the end of Q4 2015, increasing approximately $5.5 billion, or 1.8 percent, from $305.5 billion in Q3 2015.
On a year-over-year basis, the value of negative equity declined overall from $348 billion in Q4 2014, representing a decrease of 10.7 percent in 12 months.
Of the more than 50 million residential properties with a mortgage, approximately 9.5 million, or 18.9 percent, have less than 20 percent equity (referred to as “under-equitied”) and 1.2 million, or 2.3 percent, have less than 5 percent equity (referred to as near-negative equity). Borrowers who are under-equitied may have a 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 moving into negative equity if home prices fall.
“In Q4 of last year home equity increased by $680 billion or 11.5 percent, the 13th consecutive quarter of double digit growth,” said Frank Nothaft, chief economist for CoreLogic. “The improvement in equity reflects positive home prices and continued deleveraging of mortgage balances by households.”
“The number of homeowners with more than 20 percent equity is rising rapidly,” said Anand Nallathambi, president and CEO of CoreLogic. “Higher prices driven largely by tight supply are certainly a big reason for the rise, but continued population growth, household formation and ultralow interest rates are also factors. Looking ahead in 2016, we expect home equity levels to continue to build, which is a good thing for the long-term health of the U.S. economy.”