Rising home prices have contributed to improvements in home equity, the largest source of wealth for many Americans, according to CoreLogic’s Equity Report for the third quarter.
The Equity Report provides a quarterly overview of the distribution of equity across all U.S. single-family residential properties with a mortgage. In addition to providing a national snapshot, the report includes details for all states and the 25 largest metro areas.
A broad overview
Nationwide, borrower equity increased year-over-year by $741 billion. During Q3, 256,000 residential properties regained equity, putting the number of mortgaged residential properties with equity at 46.3 million. That’s 92 percent of total mortgaged properties, CoreLogic said.
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The average loan-to-value (LTV) ratio for all mortgaged homes is now 57 percent. About 0.8 million, or 1.6 percent, of all mortgaged homes have an LTV ratio of 100 to 105 percent. Yet another 1.5 million, or 3 percent, of all mortgaged homes have an LTV ratio greater than 125 percent.
In addition, 8.9 million, or 17.6 percent, of mortgaged properties have positive equity, but are still considered “under-equitied” at less than 20 percent. CoreLogic warned that underwriting constraints may make it more difficult for these homeowners to obtain new home financing.
Coming up for air
But in other positive news, the number of underwater homes decreased year-over-year by 1.1 million, or 20.7 percent. Approximately 4.1 million homes, or 8.1 percent, of all residential properties with a mortgage were still underwater at the end of Q3.
For the homes in negative-equity status, the national aggregate value of negative equity was $301 billion for Q3, compared to $309.1 billion for Q2, or a decrease of $8.1 billion.
Regional perspectives
According to the report, the top five states where mortgaged residential properties have equity are:
- Montana
- Colorado
- Hawaii
- Alaska
- Texas
Metro areas with the highest percentages of equity homes are:
- Seattle
- Dallas
- Denver
- Portland, Oregon
- Houston
Five states together accounted for almost 30 percent of all negative equity in the country: Nevada, Florida, Arizona, Rhode Island and Maryland. Metro areas with the highest percentage of residences in negative equity are: Tampa, Florida; Phoenix; Chicago; Riverside, California; and Washington, D.C.
CoreLogic said that an expected 5-percent rise in home prices next year will continue to build wealth and confidence, providing support for the housing market and the broader economy throughout next year.
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It would only take about that much of an increase for another 0.8 million properties to gain equity, CoreLogic said.
