The number of residential properties with mortgages larger than the value of the holding decreased by five percent between the first and second quarters of the year, according to a report released Wednesday by CoreLogic, a California-based analysis service.
The number of underwater properties dropped from 11.4 million in the first three months of 2012 to 10.8 million properties during the second quarter. Nearly two million more borrowers in negative equity would be above water if house prices nationally increased by 5 percent,” said Anand Nallathambi, president and CEO of CoreLogic. “We currently expect home prices to continue to trend up in August. Were this trend to be sustained, we could see significant reductions in the number of borrowers in negative equity by next year.”
The report shows that both negative equity and near-negative equity mortgages decreased from 28.5 percent of the total at the end of the first quarter to 27 percent at the end of the second quarter. Nationally, the total value of negative equity decreased from $691 billion at the end of the first quarter to $689 billion in the second quarter.
“The level of negative equity continues to improve with more than 1.3 million households regaining a positive equity position since the beginning of the year,” said Mark Fleming, chief economist for CoreLogic. “Surging home prices this spring and summer, lower levels of inventory, and declining REO sale shares are all contributing to the nascent housing recovery and declining negative equity.”
States with the highest percentages of underwater property include Nevada at 59 percent, Florida at 43 percent, Arizona at 40 percent, Georgia at 36 percent and Michigan at 33 percent. All five states combined account for 34.1 percent of the total amount of negative equity in the nation.