More U.S. Mortgaged Homes Return to Positive Equity

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Approximately 791,000 more U.S. homes returned to a state of positive equity during the third quarter, bringing the total to 42.6 million mortgaged residential properties with equity, according to CoreLogic. 

At the end of the third quarter the number of homes remaining in negative equity stood at approximately 6.4 million homes, or 13 percent of all mortgages homes. This is down from 7.2 million homes, or 14.7 percent at the end of the second quarter.  Negative equity -- often referred to as "underwater" or upside down" --  means that borrowers owe more on their mortgages than their homes are worth.

"Rising home prices continued to help homeowners regain their lost equity in the third quarter of 2013," said Mark Fleming, chief economist for CoreLogic. "Fewer than 7 million homeowners are underwater, with a total mortgage debt of $1.6 trillion. Negative equity will decline even further in the coming quarters as the housing market continues to improve."

At the end of the third quarter, the national aggregate value of negative equity was $397 billion, compared to $430 billion the previous quarter, mostly driven by home price gains, CoreLogic reports. 

Of the homes with positive equity, 10 million have less than 20 percent equity -- referred to as "under-equitied" -- and may have a hard time finding new financing.

In the third quarter, more than 1.5 million homes had less than five percent equity, considered near-negative equity, according to CoreLogic. Homes that are near negative equity are considered at risk if property prices fall. 

The number of mortgages homes returning to positive equity is expected to increase next year. 

"We should see a further rebound in consumer confidence and economic growth in 2014 as more homeowners escape the negative equity trap," said Anand Nallathambi, president and CEO of CoreLogic. "Home price appreciation has helped more than 3 million property owners regain equity since the first quarter of 2013."

More from the report:

• Nevada had the highest percentage of mortgaged properties in negative equity at 32.2 percent, followed by Florida (28.8 percent), Arizona (22.5 percent), Ohio (18.0 percent) and Georgia (17.8 percent). These top five states combined accounted for 36.4 percent of negative equity in the U.S.

• Of the largest 25 metropolitan areas, Orlando-Kissimmee-Sanford, Fla., had the highest percentage of mortgaged properties in negative equity at 32.3 percent, followed by Tampa-St. Petersburg-Clearwater, Fla. (30.1 percent), Phoenix-Mesa-Scottsdale, Ariz. (23.2 percent), Riverside-San Bernardino-Ontario, Calif. (20.8 percent) and Chicago-Naperville-Arlington Heights, Ill. (20.5 percent).

• Of the total $397 billion in negative equity, first liens without home equity loans accounted for $202 billion aggregate negative equity, while first liens with home equity loans accounted for $195 billion.

• 3.8 million upside-down borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $221,000. The average underwater amount is $53,000.

• 2.5 million upside-down borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $296,000.The average underwater amount is $77,000.

• The bulk of home equity for mortgaged properties is concentrated at the high end of the housing market. For example, 92 percent of homes valued at greater than $200,000 have equity compared with 82 percent of homes valued at less than $200,000.