CoreLogic released an analysis of residential properties in the first quarter of 2014, focusing specifically on homes with negative equity. The company found that more than 300,000 homes returned to positive equity in the quarter, bringing the total number of mortgaged residential properties with equity to more than 43 million.
Negative equity, more commonly known as a home being "underwater," means borrowers owe more on their mortgage than their homes are worth. The company cites declines in value, an increase in mortgage debt, or some combination of the two as factors leading to a home having negative equity.
The company's analysis found that roughly 6.3 million properties, or 12.7 percent of all residential properties with a mortgage, had negative equity as of Q1 2014. The first quarter of 2014 saw a decline from the fourth quarter of 2013, when 6.6 million homes had negative equity, or 13.4 percent.
Year-over-year, negative equity properties have declined 20.2 percent from 9.8 million in 2013 to 6.3 million in Q1 2014.
Underwater homes have a national aggregate value of negative equity of $383.7 billion at the end of the quarter, according to CoreLogic. Negative equity is down $16.9 billion from roughly $400 billion in the fourth quarter of 2013.
"Despite the massive improvement in prices and reduction in negative equity over the last few years, many borrowers still lack sufficient equity to move and purchase a home," said Sam Khater, deputy chief economist for CoreLogic. "One in five borrowers have less than 10 percent equity in their property, which is not enough to cover the down payment and additional costs associated with a conventional mortgage."
The company commented that of the 43 million residential properties with equity, roughly 10 million have less than 20 percent equity. Homes in this particular situation may have a more difficult time refinancing or obtaining new financing to sell and buy another home due to tougher underwriting standards.
"Prices continue to rise across most of the country and significantly fewer borrowers are underwater today compared to last year," said Anand Nallathambi, president and CEO of CoreLogic. "An additional rise in home prices of 5 percent, which we are projecting will occur over the next 12 months, will lift another 1.2 million properties out of the negative equity trap."
Nevada had the highest percentage of mortgaged properties in negative equity at 29.4 percent, followed by Florida (26.9 percent), Mississippi (20.1 percent), Arizona (20.1 percent) and Illinois (19.7 percent). These top five states combined account for 31.1 percent of negative equity in the United States.
Texas had the highest percentage of mortgaged residential properties in an equity position at 96.7 percent, followed by Montana (96.3 percent), Alaska (95.7 percent), North Dakota (95.7 percent) and Hawaii (95.6 percent).
The company found that the bulk of home equity for mortgage properties is concentrated at the high end of the housing market. CoreLogic noted that 93 percent of homes valued at greater than $200,000 have equity compared to 82 percent of homes valued at less than $200,000.