RealtyTrac: Underwater Properties Down by 600,000+ in 2015

RealtyTrac, Irvine, Calif., reported 6.4 million U.S. properties in negative equity at the end of 2015, representing 11.5 percent of all properties with a mortgage, a drop of 616,000 from a year ago.

The company’s U.S. Home Equity & Underwater Report also estimated 1.3 million U.S. properties returned to positive equity by the end of 2015, to 12.6 million. RealtyTrac said this represents 22.5 percent of all properties with a mortgage. The number of equity rich properties at the end of 2015.

The report said year-end seriously underwater properties fell by 481,292 from 6.9 million, representing 12.7 percent of all properties with a mortgage at the end of the third quarter and down 616,189 from 7.1 million (7,052,570) representing 12.7 percent of all properties with a mortgage at the end of 2014. The number of seriously underwater properties at the end of 2015 was half the 12.8 million representing 28.6 percent of all properties with a mortgage second quarter 2012, the peak for seriously underwater properties.

“Over the past three and a half years, the number of seriously underwater properties has been cut in half, but we continue to deal with a long tail of seriously underwater properties, and it will likely be another five years at least before most of those remaining underwater properties move into positive equity territory,” said Daren Blomquist, vice president with RealtyTrac. “At the other end of the spectrum, the growing number of equity rich properties reflects a moribund move-up market and restrained leveraging of home equity by U.S. homeowners.”

Among metropolitan statistical areas with a population of at least 500,000, those with the highest share of seriously underwater properties as of the end of 2015 were Las Vegas (27.7 percent), Lakeland, Fla. (24.4 percent), Cleveland (24.2 percent), Akron, Ohio (22.5 percent) and Orlando (22.2 percent).

Markets with the lowest share of properties seriously underwater were San Jose, Calif. (1.8 percent), San Francisco (3.8 percent), Austin, Texas (3.9 percent), Portland, Ore. (4.2 percent), and Boston (4.2 percent).

Among metropolitan statistical areas with a population of at least 500,000, those with the highest share of equity rich properties as of the end of 2015 were San Jose, Calif. (53.7 percent), San Francisco (47.6 percent), Honolulu (36.7 percent), Los Angeles (35.8 percent) and Pittsburgh (35.0 percent). Markets with lowest share of equity rich properties were Memphis (11.4 percent), Dayton, Ohio (12.1 percent), Indianapolis (12.4 percent), Las Vegas (13.1 percent) and Cleveland (13.3 percent).

The report said 49.7 percent of all homes in foreclosure had some equity. The share of in-foreclosure properties with equity at the end of 2015 rose from 43.3 percent in the third quarter, up from 34.6 percent as of the end of 2014.

Metro areas with the highest percentage of foreclosure homes with equity were Denver (89.6 percent), Austin, Texas (88.8 percent), San Jose, California (87.5 percent), Pittsburgh (85.3 percent), and Nashville (83.6 percent). As of the end of 2015, 28.4 percent of properties in foreclosure were seriously underwater, down from 33.4 percent at the end of the third quarter and down from 34.6 percent at the end of 2014.

Markets with the highest percentage of in-foreclosure properties that were seriously underwater were Las Vegas (50.2 percent seriously underwater), Chicago (46.7 percent), Lakeland, Fla. (46.1 percent), Cleveland (45.1 percent) and Deltona-Daytona Beach-Ormond Beach, Fla. (44.9 percent).

RealtyTrac said of the 6.4 million properties seriously underwater:
–41 percent were non-owner occupied, while 59 percent were owner-occupied
–57 percent had been owned 10 years or less, while 43 percent had been owned more than 10 years
–63 percent had a loan originated in 2008 or earlier, while 37 percent had a loan originated in 2009 or later
–33 percent of all properties valued $100,000 or less were seriously underwater, while 8.7 percent of properties valued more than $100,000 were seriously underwater

Of the 12.6 million equity rich properties:
–23 percent were non-owner occupied, while 77 percent were owner-occupied
–62 percent had been owned for more than 10 years, while 38 percent had been owned for 10 years or less
–52 percent had a loan originated in 2009 or later, while 48 percent had a loan originated in 2008 or earlier
–47 percent of all properties valued more than $1 million were equity rich, while 21.7 percent of properties valued $1 million or less were equity rich.