Recent data indicates that rising home prices across the country have helped to lift millions of people out from being “under water” on their loans. This same trend is being experienced in the Southern California region.
Getting Out from Under Water
Being “underwater” or “upside down” on a mortgage loan refers to when the borrower owes more money on the home than the actual value of the home. After the housing bubble bust that led to the Great Recession that started in 2007, many homeowners found themselves in this situation and unable to make their scheduled mortgage payments. This negative equity may have occurred due to a decrease in the value of the home, an increase in mortgage debt or a combination of the two.
Examining Mortgages in Los Angeles
According to recent data, 4.5 percent of residential properties with a mortgage in the Los Angeles-Long Beach-Glendale area were experiencing negative equity at the end of last year. This equates to 67,077 homes. This is a significant improvement when compared to the previous year, at which time 6.5 percent of homes were underwater for a total of 98,795 homes. In the third quarter of 2015, 4.6 percent of homes in the Los Angeles-Long Beach-Glendale area were underwater for a total of 69,445 homes.
In addition to those homes that were experiencing negative equity, there are also many with very little room to spare. During the fourth quarter of 2014, 1.4 percent of homes had less than 5 percent equity for a total of 20,545 homes. Homes with less than 5 percent equity are referred to as being at near-negative equity. The previous year, 1.8 percent of homes were at near-negative equity for a total of 26,564 homes. In the third quarter of 2015, these figures were at 1.4 percent for 20,693 homes.
The Bigger Picture
When looking at the top metropolitan areas, the top five areas where mortgage properties were in the positive equity position were:
- San Francisco-Redwood City-South San Francisco: 99.3 percent
- Houston-The Woodlands-Sugar Land, Texas: 98.1 percent
- Denver-Aurora-Lakewood, Colorado: 98 percent
- Los Angeles-Long Beach-Glendale, California: 95.5 percent
- New York-Jersey City-White Plains, New York-New Jersey: 93.8 percent
At the national level, a total of 46.3 million mortgaged residential properties had equity at the end of the year, representing 91.5 percent of all mortgaged properties. Borrower equity also increased year over year by $682 billion when comparing fourth quarter figures. Meanwhile, 8.3 percent of mortgaged residential properties had negative equity, which represents about 4.3 million homes. This figure is up slightly from the third quarter, at which time the figure was at 8.3 percent. On the other hand, it is significantly lower than the 10.7 percent that as recorded for the fourth quarter of 2014. Approximately 18.9 percent of properties had less than 20 percent equity while 2.3 percent had near-negative equity.
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(all data current as of 10/18/2017)
Listing information deemed reliable but not guaranteed. Read full disclaimer.