The number of underwater homeowners has declined for the second consecutive quarter.
The research firm CoreLogic reports that 11 million borrowers owed more on the loan than their home was worth at the end of June. That equates to 23 percent of all residential properties with mortgages, and is down from 11.2 million, or 24 percent, at the end of March.
It seems like good news on the surface, but the company says foreclosures, rather than meaningful price appreciation, were the primary driver behind the change in negative equity.
In addition to the 11 million homeowners already underwater, another 2.4 million borrowers had less than five percent equity in their homes at the end of the second quarter, according to CoreLogic.
Together, negative equity and near-negative equity mortgages accounted for nearly 28 percent of all residential properties with a mortgage nationwide.
CoreLogic’s study shows that the biggest improvement 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.
And since the company writes, “the declines were entirely due to foreclosures, not the stabilization or small increases in prices in some markets,” the data suggest that these 200,000 homeowners that were more than 25 percent underwater decided to throw in the towel and walk away from their mortgage debt.
In fact, CoreLogic says during the second quarter, property values increased an average of between 1 percent and 0.2 percent for homes with equity, while values fell for every segment in negative equity.
Negative equity remains concentrated in five states. Nevada had the highest percentage of negative equity in Q2 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).
Since peaking in the fourth quarter of 2009, CoreLogic says the number of borrowers in a negative equity position has declined by about 350,000, but again the drop is a by-product of foreclosure.
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