According to a report released Thursday by RealtyTrac, 15% of U.S. properties (representing 8.1 million properties) with a mortgage are seriously underwater — meaning the homeowner owes at least 25% more than the estimated market value of the property. This is down from 17% of mortgaged properties in the second quarter of this year and the lowest rate since the company began tracking negative equity in the first quarter of 2012. The highest percentage of homes that are seriously underwater were those bought during the housing bubble in 2006 (40% of homes bought in 2006 are still seriously underwater), 2007 (35%) and 2005 (32%) in particular.
While that sounds like good news — and it mostly is — there are some caveats. First, the rate of decline in negative equity is slowing, as home price appreciation is slowing, says Daren Blomquist, RealtyTrac vice president . Plus, the negative equity problem is particularly troubling for those with more modest homes: More than half of properties worth less than $50,000 and more than one-third of those worth $50,000 to $100,000 are seriously underwater, compared with fewer than 10% of homes worth $300,000 and above.
Furthermore, residents of some states — in particular those that were hit hardest by the housing bubble — are still feeling the negative equity pinch — big time. In Nevada — one of the states hit hardest by the housing crisis — nearly 1 in 3 mortgaged properties are seriously underwater, making it the state with the highest percentage of seriously underwater homes; Florida (28%), Illinois (26%) and Michigan (25%) also have high numbers of seriously underwater properties. All told, in eight U.S. states, more than one in five mortgaged properties is still seriously underwater.
On a brighter note, plenty of homeowners are feeling the benefits of this housing recovery. The percentage of mortgaged properties that are now equity rich — meaning that the homeowner has at least 50% equity — hit 20% (representing 10.8 million properties) in the third quarter, up from 19% last quarter. Hawaii tops the list, as more than one in three properties (35%) in this state have very high levels of equity, followed by New York and Vermont (both 33%). Blomquist says that these states are seeing higher levels of equity richness because they “didn’t see as big of a deterioration in home prices [during the housing crisis] as in other states.”