Housing Scorecard: Nearly 6 Million Fewer Underwater as Prices Hit 2005 Levels

Jan 13 2014, 10:49AM

Rising home prices are continuing to drive down the number of homeowners who are underwater according to the December Housing Scorecard published by the Departments of Treasury and Housing and Urban Development (HUD).  HUD Associate Deputy Assistant Secretary for Economic Affairs Edward J. Szymanoski said, “Since the beginning of 2012, the number of homeowners underwater has declined by 5.7 million and homeowners’ equity has risen by 55 percent to $9.7 trillion.”  Homeowners’ equity jumped $418 billion, or 4.5 percent, to $9.669 trillion in the third quarter of 2013, returning to a level slightly higher than at the end of 2003.

As of October 2013, the Federal Housing Finance Agency (FHFA) purchase-only index rose 8.2 percent from last year and ticked up 0.5 percent (seasonally adjusted) from September, showing that home values are now on par with prices in early 2005. The S&P/Case-Shiller 20-City Home Price Index for October posted returns of 13.6 percent over the past 12 months and was up 0.2 percent (not seasonally adjusted) over September, indicating that home values are at the same level as in mid-2004.

The Scorecard notes there is much good news to report but the overall recovery remains fragile.  Szymanoski said there remains more work to do to address the 6.4 million homeowners who remain underwater; “Nevertheless, these are encouraging signs that the housing market recovery is providing millions of American homeowners with more economic security.”

The Scorecard is a monthly recap of housing data from sources such as FHFA and S&P Case-Shiller as well as RealtyTrac, the National Associations of Home Builders and Realtors®, and the Census Bureau, most of which has been previously reported by MND.  It also contains by reference the monthly record of the Making Home Affordable (MHA) Program and nearly half dozen initiatives operating under that umbrella.

The MHA report this month contains data through November 2013 and this month spotlights the Second Lien Modification Program (2MP).  That program was expanded in September and now, when a borrower’s first lien is modified under the GSE Standard Modification requirements (which applies to loans owned or guaranteed by Fannie Mae or Freddie Mac) and the first lien satisfies the Home Affordable Modification Program (HAMP) eligibility criteria, the 2MP servicer must offer to modify or extinguish the borrower’s second lien under 2MP.

The report says that more than 123,000 second lien modifications have now been completed through 2MP and homeowners with an active permanent 2MP modification save a median of $153 per month on their second mortgage and a median total of  $784 on first and second mortgages, 41 percent of the pre-modification payment.  Homeowners who receive a full extinguishment of their second lien receive a median total first and second lien monthly payment reduction of $1,047, or 53 percent of their before-modification payment.

MHA says the various programs it operates, HAMP, 2MP, Home Affordable Foreclosure Alternatives (HAFA) and the UP Forbearance Program, have assisted 1.9 million homeowners since they were initiated in 2009 and later.  Of these, 1.3 million were modifications done through HAMP.  Since the last HAMP report there have been 22,814 permanent first lien modifications initiated and a total of 35,869 assisted through all MHA programs except its . Principle Reduction Activity (PRA).   That program has eliminated $10,124,838,950 in outstanding principal and another $2.5 billion in principle has been reduced outside of PRA.  GSE loans are not eligible for principle reduction.

1 in 5 Homeowners Drowning

 

9.3 million U.S. residential properties are underwater

 

 

underwater homeowner

 

RealtyTrac released its U.S. Home Equity & Underwater Report for December 2013, which shows that 9.3 million U.S. residential properties were deeply underwater, or about 1 in 5 of every property with a mortgage.

“Deeply underwater” is defined as worth at least 25% less than the combined loans secured by the property.

That was down from 10.7 million residential properties deeply underwater in September 2013, representing 23% of all properties with a mortgage, and down from 10.9 million properties deeply underwater in January 2013, representing 26% of all properties with a mortgage.

The high watermark for being deeply underwater came in May 2012, when 12.8 million U.S. residential properties were deeply underwater, representing 29% of all properties with a mortgage.

“During the housing downturn we saw a downward spiral of falling home prices resulting in rising negative equity, which in turn put millions of homeowners at higher risk for foreclosure when they encountered a trigger event such as job loss,” said Daren Blomquist, vice president at RealtyTrac. “Now we are seeing the reverse trend: rising home prices resulting in falling negative equity, which in turn is giving millions of homeowners a lifeline to avoid foreclosure when they encounter a trigger event. On the other end of the spectrum, the percentage of equity-rich homeowners is nearing a tipping point that should result in a larger inventory of homes listed for sale and give the overall economy a nice shot in the arm in 2014.”

“However, there are still millions of homeowners who are in such a deep equity hole that it will take years for them to regain their equity,” Blomquist added. “The longer these homeowners remain in a negative equity position without relief in the form of a principal loan balance reduction, the more likely that foreclosure will become the path of least resistance for them.”

The universe of equity-rich properties — with at least 50% equity — grew during the fourth quarter as well, from 7.4 million representing 16% of all residential properties with a mortgage in September, to 9.1 million representing 18% of all residential properties with a mortgage in December.

“With available home inventory and interest rates at all-time lows, we experienced an increased rate of appreciation throughout the Ohio housing market during the fourth quarter of 2013,” said Michael Mahon, executive vice president/broker at HER Realtors, covering the Cincinnati, Columbus and Dayton markets in Ohio.

RealtyTrac’s report also found the following:

  • States with the highest percentage of residential properties deeply underwater in December were Nevada (38%) Florida (34%) Illinois (32%) Michigan (31%) Missouri (28%) and Ohio (28%).
  • Major metropolitan statistical areas with the highest percentage of residential properties deeply underwater in December were Las Vegas (41%) Orlando, Fla., (36%) Detroit (35%) Tampa, Fla., (35%) Miami (33%) and Chicago (33%).
  • States with the highest percentage of equity-rich residential properties were Hawaii (36%) New York (33%) California (26%) Montana (24%) and Maine (24%. The District of Columbia also posted an equity-rich rate of 24%.
  • Major metropolitan statistical areas with the highest percentage of equity-rich residential properties were San Jose, Calif., (37%) San Francisco (33%) Pittsburgh (30%) Buffalo, N.Y. (30%) and Los Angeles (29%).
  • States with the highest percentage of deeply underwater residential properties in the foreclosure process included Nevada (65%) Florida (61%) Illinois (61%) Michigan (55%) and Ohio (48%).
  • Major metro areas with the highest percentage of deeply underwater residential properties in the foreclosure process were Las Vegas (66%) Tampa, Fla. (63%) Chicago (62%) Orlando (61%) and Detroit (61%).
  • States with the highest percentage of foreclosure properties with some equity included Oklahoma (62%) Colorado (54%) New York (52%) Texas (51% and North Carolina (45%).