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9.1 Million U.S. Residential Properties Seriously Underwater in First Quarter, Lowest Level in Two Years

17 Percent of U.S. Properties Seriously Underwater, Down From 26 Percent Year Ago; 9.9 Million Properties With 50 Percent Equity or More, Up From 9.1 Million in Q4 2013; 35 Percent of Residential Properties in Foreclosure Process With Positive Equity

IRVINE, CA -- (Marketwired) -- 04/17/14 -- RealtyTrac® (, the nation's leading source for comprehensive housing data, today released its U.S. Home Equity & Underwater Report for the first quarter of 2014, which shows that 9.1 million U.S. residential properties were seriously underwater -- where the combined loan amount secured by the property is at least 25 percent higher than the property's estimated market value -- representing 17 percent of all properties with a mortgage in the first quarter.

The first quarter negative equity numbers were down to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012. In the fourth quarter of 2013, 9.3 million residential properties representing 19 percent of all properties with a mortgage were seriously underwater, and in the first quarter of 2013 10.9 million residential properties representing 26 percent of all properties with a mortgage were seriously underwater. The recent peak in negative equity was the second quarter of 2012, when 12.8 million U.S. residential properties representing 29 percent of all properties with a mortgage were seriously underwater.

The universe of equity-rich properties -- those with at least 50 percent equity -- grew to 9.9 million representing 19 percent of all properties with a mortgage in the first quarter, up from 9.1 million representing 18 percent of all properties with a mortgage in the fourth quarter of 2013.

Another 8.5 million properties were on the verge of resurfacing in the first quarter, with between 10 percent negative equity and 10 percent positive equity. This segment represented 16 percent of all properties with a mortgage in the first quarter. That was compared to 8.3 million properties representing 17 percent of all properties with a mortgage in the fourth quarter of 2013.

Fewer distressed properties had negative equity in the first quarter, with 45 percent of all properties in the foreclosure process seriously underwater -- down from 48 percent in the fourth quarter of 2013 and down from 58 percent in the first quarter of 2013. Conversely, the share of foreclosures with positive equity increased to 35 percent in the first quarter, up from 31 percent in the fourth quarter and up from 24 percent in the third quarter of 2013.

"U.S. homeowners are continuing to recover equity lost during the Great Recession, but the pace of that recovering equity slowed in the first quarter, corresponding to slowing home price appreciation," said Daren Blomquist, vice president at RealtyTrac. "Slower price appreciation means the 9 million homeowners seriously underwater could still have a long road back to positive equity.

"The relatively high percentage of foreclosures with equity is surprising to many because it would seem homeowners with equity could easily avoid foreclosure by leveraging that equity by refinancing or with an equity sale of the home," Blomquist noted. "But many distressed homeowners with equity may not realize they have equity and in some cases have vacated the property already, assuming that foreclosure is inevitable."

"Underwater properties have become an insignificant part of the housing market in Orange County," said Chris Pollinger, senior vice president of sales at First Team Real Estate, covering the Southern California market. "Out of the nearly 40,000 properties we currently have listed only about 3,000 of those are distressed or short sale properties, proving that the continual rise in home prices is relieving the housing market of underwater homeowners."

Markets with most negative equity
States with the highest percentage of residential properties seriously underwater in the first quarter were Nevada (34 percent), Florida (31 percent), Illinois (30 percent), Michigan (29 percent), and Ohio (27 percent).

Major metropolitan statistical areas (population 500,000 or more) with the highest percentage of residential properties seriously underwater were Las Vegas (37 percent), Lakeland, Fla., (36 percent), Palm Bay-Melbourne-Titusville, Fla., (35 percent), Cleveland (35 percent), Akron, Ohio (34 percent), and Detroit (33 percent).

Markets with most resurfacing equity
Major metro areas with the highest percentage of resurfacing equity -- between negative 10 percent and positive 10 percent -- were Louisville, Ky., (37 percent), Columbia, S.C. (28 percent), Colorado Springs, Colo., (28 percent), Little Rock, Ark., (28 percent), and Tulsa, Okla., (27 percent).

"Homeowners are no longer underwater on their homes like they were at the peak of 2012," said Sheldon Detrick, CEO of Prudential Detrick/Alliance Realty, covering the Oklahoma City and Tulsa, Okla., markets. "Low housing inventory and more buyers are causing home prices to rise and sell over list price, giving homeowners who are moderately underwater a chance to avoid the foreclosure process."

Markets with most equity-rich properties
Major metro areas with the highest percentage of equity rich properties -- those with at least 50 percent equity -- were San Jose, Calif., (39 percent), Honolulu (35 percent), San Francisco (35 percent), Poughkeepsie, N.Y., (34 percent), and Los Angeles (32 percent).

Markets with most positive-equity foreclosures
Major metro areas with more than 50 percent of properties in foreclosure with equity included Denver (64 percent), Boston (58 percent), Minneapolis (58 percent), Houston (54 percent), and Washington, D.C. (52 percent).

"Home prices continue to rise due to record-low inventory levels. Our median closing price is now up to $313,846, which is substantially higher than it was a year ago, so there is no question that there are significantly fewer people who are underwater on their homes," said Phil Shell, a managing broker at RE/MAX Alliance, covering the Denver, Colo. market.

"The short sale market really dried up about nine months ago, but we do still see some short sale transactions with higher-priced homes in the $700,000 to $800,000 plus range," added Heidi Greer, also a managing broker at RE/MAX Alliance.

Report methodology
The RealtyTrac U.S. Home Equity & Underwater report provides counts of residential properties based on several categories of equity -- or loan to value (LTV) -- at the state, metro and county level, along with the percentage of total residential properties with a mortgage that each equity category represents. The equity/LTV calculation is derived from a combination of record-level open loan data and record-level estimated property value data, and is also matched against record-level foreclosure data to determine foreclosure status for each equity/LTV category.

Deeply underwater: Loan to value ratio of 125 percent or above, meaning the homeowner owed at least 25 percent more than the estimated market value of the property.

Equity Rich: Loan to value ratio of 50 percent or lower, meaning the homeowner had at least 50 percent equity.

Foreclosures w/Equity: Properties in some stage of the foreclosure process (default or scheduled for auction, not including bank-owned) where the loan to value ratio was 100 percent or lower.

Report License
The RealtyTrac U.S. Foreclosure Market Report is the result of a proprietary evaluation of information compiled by RealtyTrac; the report and any of the information in whole or in part can only be quoted, copied, published, re-published, distributed and/or re-distributed or used in any manner if the user specifically references RealtyTrac as the source for said report and/or any of the information set forth within the report.

Data Licensing and Custom Report Order
Investors, businesses and government institutions can contact RealtyTrac to license bulk foreclosure and neighborhood data or purchase customized reports. For more information contact our Data Licensing Department at 800.462.5193 or [email protected].

About RealtyTrac Inc.
RealtyTrac is a leading supplier of U.S. real estate data, with nationwide parcel-level records for more than 125 million U.S. parcels that include property characteristics, tax assessor data, sales and mortgage deed records, Automated Valuation Models (AVMs) and 20 million active and historical default, foreclosure auction and bank-owned properties. RealtyTrac's housing data and foreclosure reports are relied on by the Federal Reserve, U.S. Treasury Department, HUD, numerous state housing and banking departments, investment funds as well as millions of real estate professionals and consumers, to help evaluate housing trends and make informed decisions about real estate.

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