CoreLogic’s newest equity report finds rising home values have pushed 90 percent of homeowners into positive equity

A new analysis from CoreLogic found that rapacious home price appreciation over the last year has had the well-received effect of dredging the industry’s depressed seabed and buoying homeowners into positive equity – or simply improving it for those already above water.

In the first quarter of 2015, more than 250,000 properties regained equity, which bolstered the overall number of mortgaged residential properties with equity to about 45 million, or 90 percent of all mortgaged properties.

Breaking the 90 percent mark is a significant milestone in the more encompassing housing recovery, but it’s not the first time the industry has reached the level in recent years. In the third quarter of 2014, mortgaged properties with equity also reached a 90 percent share of all mortgaged properties before dropping to 89 percent later that year. From Q4 2014 to Q1 2015, negative equity among mortgage holders dropped from 5.4 to 5.1 million. Year-over-year, numbers fell 12.9 percent from 6.3 million.

Equity in Boston was even more pronounced, as nearly 93 percent of residential mortgages were above water. The city’s numbers are up from 2014’s first quarter, when negative equity share was 9.8 percent, which is a positive sign for Massachusetts’ biggest metro, as is the drop in near negative equity mortgages from 2.3 percent in Q1 2014 to 1.8 percent in Q1 2015.

Statewide, 9.9 percent of residential mortgages are in negative equity and 2.4 percent are near negative.

Negative Equity Still an Issue

The findings CoreLogic published in its first quarter report detail a significant healing on both national and regional scales. However, while the progress is promising, there remain significant hurdles within the industry as homeowners struggle to maintain and regain equity.

• Of the more than 50 million residential properties with a mortgage, approximately 9.7 million, or 19.4 percent, have less than 20 percent equity (referred to as “under-equitied”), and 1.3 million, or 2.7 percent, have less than 5 percent equity (referred to as near-negative equity).
• Approximately 3.1 million underwater borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $229,000. The average underwater amount is $58,000.

The problem is particularly acute in the lower end of the market, where equity is much more sparse.

• The bulk of positive equity for mortgaged properties is concentrated at the high end of the housing market. For example, 94 percent of homes valued at greater than $200,000 have equity, compared with 85 percent of homes valued at less than $200,000.

1 Million See Equity Opportunity

The distribution of equity represents a persistent problem warranting address in the weeks, months and years to come. But in the now, improving equity is a symptom of a healing economy, and with it come more opportunities, said CoreLogic Chief Economist Frank Nothaft.

“About 90 percent of homeowners now have housing equity and, as a result, have experienced an increase in wealth, which can spur additional consumption and investment expenditures,” he said. “The remaining 10 percent of owners with negative equity will find their home value rising while they continue to pay down principal on their amortizing mortgage loan.”

But the number of underwater mortgages could see even more shrinkage come Q2 2015 if prices continue increasing.

Anand Nallathambi, president and CEO of CoreLogic, said that while there remain 5 million homeowners in negative equity, should home values improve by an additional 5 percent, approximately 1 million additional homeowners will be pushed into equity.