A new report from CoreLogic shows a slight increase in the amount of equity in the market – but some did better than others.
The timeline of the housing crisis unfolded differently from state to state, with some feeling the effects a bit more acutely than others, but one thing is uniformly certain: it peaked years ago. Now, instead of building up to an impending collapse, we’re working to rebuild a market that’s stronger and more resilient than its 2007 counterpart. Unfortunately, as a recent CoreLogic report pointed out, in many places progress is slow going.
When the market took a downward turn, like a stone in water, it sent ripples throughout the real estate industry, as well as several peripheral industries. In Houston, the residual effects have been much less pronounced than elsewhere in the nation. According to CoreLogic’s report, negative equity has all but vanished from one of Texas’ hottest destinations, making up only three percent of the local market, keeping Houston buyers happy and lending standards reasonable.
What’s more, average loan to value in the city, which represents the ratio of the first mortgage lien to a property’s overall value, is 57.1 percent – one of the lowest in the nation. The higher the LTV, the riskier the loan, which puts Houston towards the safer side of the lending spectrum. More than 80 percent of the nearly 1 million mortgaged properties in Houston have an LTV below 80 percent, giving them some equity, and only 13 percent suffer from an LTV closer to 100 percent.
Negative Equity Persists Nationwide
While CoreLogic’s report provides an in-depth look at the status of several of the country’s more significant regional and local markets, their collective research helps to paint a more detailed national picture, as well, including such insights as:
- Approximately 6.3 million properties with a mortgage, or 12.7 percent, were still in negative equity at the end of the first quarter of 2014.
- The national aggregate of negative equity is $383.7 billion – $16.9 billion less than the same time a year ago.
- The average LTV is 60.8 percent. More than 3.5 million have a LTV 100 percent or above.
- The majority of home equity is concentrated at the higher end of the market, with 93 percent of homes valued at greater than $200,000 having equity.
Slowing Building Towards Recovery
In some areas of the country, recovery is a speedboat traveling with the current, elsewhere it’s a turtle making its way upstream. For the most part, however, it seems the direction the recovery is taking is a positive one.
“Prices continue to rise across most of the country and significantly fewer borrowers are underwater today compared to last year,” Anand Nallathambi, president and CEO of CoreLogic, said.
Nallathambi went on to add that if home prices, which are currently on the upswing, go up an additional five percent – as projected – approximately 1.2 million properties will be lifted out of negative equity.
Despite the good news, CoreLogic’s Deputy Chief Economist Sam Khater made sure to remark on the challenges still facing the industry.
“One in five borrowers have less than 10 percent equity in their property,” he said, adding that it “is not enough to cover the down payment and additional costs associated with a conventional mortgage.”
There have been “massing improvements,” Khater said, both to prices and the reduction in negative equity over the past few years, but, sadly, it’s still not the time to kick up our heels and say, “job well done.” If the industry continues recovering at this pace, however, 2015 could be a different story.