By Peter Ricci
Riding the wave of increasing home prices, approximately 100,000 borrowers were lifted out of negative equity in the third quarter of 2012, according to the latest analysis of mortgages by CoreLogic.
From January to September 2012, 1.4 million borrowers have entered positive equity.
Negative Equity in the American Housing Market – Slowly Improving
CoreLogic’s latest report was further evidence of the negative equity situation in the U.S. housing market, one that, though still a bit troublesome, is improving:
- At the end of 2012’s third quarter, 10.7 million homes were in negative equity; that’s 22 percent of all residential properties with a mortgage, but again, that’s 100,000 fewer homes than at the end of the second quarter.
- Though 2.3 million borrowers were listed as “near-negative equity,” meaning they had less than 5 percent equity in their home, there were 1.8 million borrowers in Q3 who were only 5 percent underwater, meaning that if home price gains continue into 2013, we could be seeing quite a few more homeowners entering positive equity.
- And CoreLogic’s own data on home prices is perhaps the most promising in those regards; the latest CoreLogic HPI, which we just reported on last week, reported that home prices in November increased 7.4 percent year-over-year, which was the ninth straight month of year-over-year home price increases and the strongest showing from home prices since May 2006.
- Furthermore, CoreLogic’s Pending HPI, which anticipates home prices for the next month, predicted a 7.9 percent year-over-year increase in December.
HARPing on Negative Equity in 2013
Mark Fleming, the chief economist for CoreLogic, said that the changes in negative equity were significant in 2012.
“Through the third quarter, the number of underwater borrowers declined significantly,” Fleming said. “The substantive gain in house prices made in 2012, partly due to tight inventory caused by negative equity’s lock-out effect, has paradoxically alleviated some of the pain.”
But there is one highly positive aspect to the negative equity situation – HARP refinancings. Refinancings under the government’s Home Affordable Refinance Program (HARP) have been booming in recent months, and in its report, CoreLogic stated that 21.7 million homeowners are eligible for refinancing.