In the second quarter some 9.1 million U.S. residential properties were seriously underwater — where the combined loan amount secured by the property is at least 25% higher than the property’s estimated market value — representing 17% of all properties with a mortgage, RealtyTrac reports.
The second quarter of 2014 saw a percentage decrease in homes that were seriously underwater — 17.2% versus 17.4% in the first quarter of 2014 — bringing it to the lowest level since RealtyTrac began reporting negative equity in the first quarter of 2012.
“Home price appreciation has slowed in the last few months in many of the markets with the most underwater homes, slowing the pace at which homeowners are recovering equity lost during the Great Recession,” said Daren Blomquist, vice president at RealtyTrac. “For instance, annual home price appreciation in California was at 16% in May 2014 compared to a high of 31% in July and August of 2013. In Arizona, home price appreciation has slowed to 6% annually compared to a high of 24% last year.
“In addition many of the properties that are seriously underwater are in a deep negative equity hole that will take some time to dig out of,” Blomquist continued. “The average loan-to-value on the 9.1 million homes seriously underwater was 133%, and the average loan-to-value on the homes in foreclosure that are seriously underwater was 134%.”
The recent peak in negative equity was the second quarter of 2012, when 12.8 million U.S. residential properties representing 29% of all properties with a mortgage were seriously underwater.
Another 8.8 million properties were on the verge of resurfacing equity in the second quarter of 2014, with between 10% negative equity and 10% positive equity, representing 17% of all properties with a mortgage, up from 8.5 million representing 16% of all properties with a mortgage in the first quarter of 2014.