CoreLogic, a provider of information, analytics and business services, released data on Monday that show that negative equity in residential properties has declined in Q3. This is the third consecutive quarter in which negative equity has declined.
In Q2, 11 million, or 23%, of all residential properties with mortgages were in negative equity; in Q3, that has fallen to 10.8 million, or 22.5%. Before anyone gets excited about a housing recovery, however, CoreLogic says that this decrease is “due primarily to foreclosures of severely negative equity properties rather than an increase in home values.”
The data also show that 2.4 million borrowers were near negative equity; in other words, they held less than 5% equity in their homes in Q3. Mortgages with negative equity and those with near-negative equity made up 27.5% of all residential properties with mortgages across the country.
Negative equity is concentrated in five states: Nevada, at 67%; Arizona, 49%; Florida, 46%; Michigan, 38%; and California, 32%. The largest drops in negative equity were, according to CoreLogic, in the hardest hit states: Alaska, Nevada, Arizona, California, and Florida. Idaho and Alabama saw their proportion of negative equity rise; they are the top two states in which home prices are falling.
States with the highest amount of positive equity are New York, Hawaii, Massachusetts, Rhode Island, and Connecticut. Some states are “barbells”—that is, they have large numbers of homeowners with positive equity and also large numbers with negative equity. Among these are Rhode Island, the most extreme; and to a lesser extent are Massachusetts, New Jersey, Washington, D.C., and California.
Mark Fleming, chief economist with CoreLogic, said in a statement, “Negative equity is a primary factor holding back the housing market and broader economy. The good news is that negative equity is slowly declining, but the bad news is that price declines are accelerating, which may put a stop to or reverse the recent improvement in negative equity.”