Alert: August 26, 2010
CORELOGIC® DATA SHOWS SECOND CONSECUTIVE
QUARTERLY DECLINE IN NEGATIVE EQUITY
Percent of Residential Properties With a Mortgage Underwater in
SANTA ANA, Calif., August 26, 2010— CoreLogic
(NYSE: CLGX), a leading provider of consumer, financial and property
information and business services, today released negative equity
data showing a second consecutive quarterly decline in national
negative equity rates. CoreLogic reports that 11 million, or 23
percent, of all residential properties with mortgages were in
negative equity at the end of the second quarter of 2010, down from
11.2 million and 24 percent from the first quarter of 2010.
Foreclosures, rather than meaningful price appreciation, were the
primary driver in the change in negative equity. An additional 2.4
million borrowers had less than five percent equity. Together,
negative equity and near-negative equity mortgages accounted for
nearly 28 percent of all residential properties with a mortgage
Negative equity, often referred to as "underwater" or "upside
down," means that borrowers owe more on their mortgages than their
homes are worth. Negative equity can occur because of a decline in
value, an increase in mortgage debt or a combination of both.
In Sacramento--Arden-Arcade--Roseville, 43.4 percent, or 214,468,
of all residential properties with a mortgage were in negative
equity for second quarter 2010. An additional 4.6 percent, or
22,726, were in near negative equity in
National Data Highlights
- Negative equity remains concentrated in five states: Nevada,
which had the highest percentage negative equity with 68 percent
of all of its mortgaged properties underwater, followed by Arizona
(50 percent), Florida (46 percent), Michigan (38 percent) and
California (33 percent).
- The biggest declines in negative equity were concentrated in
the hardest hit states. Nevada experienced an 11.8 percentage
point decline in negative equity share, followed by California
(-1.3), Florida (-1.3), and Arizona (-1.3). About two-thirds of
all states experienced a decline in negative equity share. Since
peaking in Q4 2009, the number of borrowers in a negative equity
position has declined by about 350,000.
- The declines were primarily due to foreclosures, not the
stabilization or small increases in prices in some markets. The
largest decrease in negative equity occurred among those with
loan-to-value (LTV) ratios in excess of 125 percent, where the
number of negative equity borrowers fell to 4.8 million, down from
5 million last quarter.
- Homes with more equity are appreciating faster than underwater
homes. The average values of properties with 50 percent or more
equity increased over 1 percent between Q4 2009 and Q2 2010.
Properties with 25 to 50 percent in equity increased an average of
0.2 percent in that period. However, values fell for every segment
in negative equity, with the biggest value decline occurring for
properties that are 50 percent or more in negative equity.
- In addition to driving foreclosures, negative equity reduces
homeowner mobility. Since the peak in home sales in 2005,
non-distressed sales have dramatically declined and there is a
clear relationship between the decline in non-distressed sales and
the level of negative equity at the zip code and state level. At
low levels of negative equity there are moderate and varied
declines in non-distressed sales across most states as it reflects
state macroeconomic fundamentals. At higher levels of negative
equity, the non-distressed declines have been much larger, which
implies that that the 11 million negative equity properties have
reduced homeowners ability to move.
- The 11 million negative equity properties are backed by $2.9
trillion in mortgage debt outstanding (MDO). On an MDO dollar
basis, the negative equity share was 33 percent percent and the
total dollar value of negative equity was $766 billion.
"Negative equity continues to both drive foreclosures and impede
the housing market recovery. With nearly 5 million borrowers
currently in severe negative equity, defaults will remain at a high
level for an extended period of time," said Mark Fleming, chief
economist with CoreLogic.
CoreLogic data includes 47 million properties with a mortgage,
which accounts for over 85 percent of all mortgages in the U.S.**
CoreLogic used its public record data as the source of the mortgage
debt outstanding (MDO) and it includes 1st mortgage liens and junior
mortgage liens and is adjusted for amortization and home equity
utilization in order to capture the true level of mortgage debt
outstanding for each property. The current value was estimated by
using the CoreLogic Automated Valuation Models (AVM) for residential
properties. The data was filtered to include only properties valued
between $30,000 and $30 million because AVM accuracy tends to
quickly worsen outside of this value range.
The amount of equity for each property was determined by
subtracting the property's estimated current value from the mortgage
debt outstanding. If the mortgage debt was greater than the
estimated value, then the property is in a negative equity position.
The data was created at the property level and aggregated to higher
levels of geography.
** Only data for mortgaged residential properties that have an
AVM value is presented. There are several states where the public
record, AVM or mortgage coverage is thin. Although coverage is thin,
these states account for fewer than 5 percent of the total
population of the U.S.
# # #