Though it may have seemed impossible to conceive during the height of housing meltdown, fewer than 10 percent of homeowners owe more on their mortgages than their houses are worth, as an increasing number of Americans are emerging from negative equity, according to a newly released report.
Nationwide, of all the homeowners who purchased their residences with a mortgage, 8 percent were underwater during the the first quarter, property analytics firm CoreLogic confirmed in its latest negative equity report. That's down from 8.5 percent – the equivalent of 4.3 million homes – during the final three-month period of 2015 and from 10.3 percent recorded in January through March of last year.
Over 98 percent of homes in Texas with positive equity
Additionally, more Americans are regaining equity in their properties, providing them with the opportunity to refinance their mortgages if they so choose. Between January and March of this year, the highest percentage of homes with positive equity was in Texas at an impressive 98.1 percent, the report said. Tied for second to the Lone Star State were Alaska and Hawaii at 97.8 percent, followed by Colorado and Washington at 97.5 percent and 97.2 percent, respectively.
Frank Nothaft, CoreLogic chief economist, noted that since 2012, equity levels for today's homeowners have risen appreciably.
"The rapid increase in home equity reflects the improvement in home prices, dwindling distressed borrowers and increased principal repayment," Nothaft explained. "These are all positive factors that will provide support to both household balance sheets and the overall economy."
Anand Nallathambi, CoreLogic president and CEO, furthered Nothaft's sentiment by pointing out that in the last year, 1 million homeowners whose mortgages formerly were upside down are now right side up, a trend that he fully anticipates will continue for the remainder of 2016 and into 2017.
Nevada with highest rate of underwater mortgages
At the same time, however, there's still room for improvement, as many homeowners with underwater mortgages in other parts of the country have yet to come up for air. This is particularly true in Nevada. Through the first quarter, 17.5 percent of the Silver State's mortgaged homes were in negative equity, more than any other state, CoreLogic reported. Florida was just behind Nevada at 15 percent, with Illinois, Rhode Island and Maryland rounding out the five states with the largest rates of underwater mortgages.
Still, Western states in general – and Western cities in particular – are making strides. For example, in a separate study recently released by home listings website Zillow, nearly three-quarters of mortgaged properties in Las Vegas were underwater in 2012. The rate has been more than halved since then to just 20.2 percent through this 2016's first quarter.
Svenja Gudell, Zillow's chief economist, pointed to the rebounding economy as part of the reason for the improvement, not only in Las Vegas but in other places where fewer homes are in negative equity.
As for the negative equity rate in the country overall, Zillow's findings were slightly different than CoreLogic's, determining that approximately 13 percent of homeowners owed more on their mortgages than their homes were worth in the first quarter. Four years ago the negative equity rate was 31 percent.
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