Underwater Mortgages on Decline

The number of seriously underwater properties is on the decline, according to the Q1 2017 Home Equity and Underwater Report released by ATTOM Data Solutions on Thursday. Approximately 5.5 million U.S. homes were seriously underwater for the quarter—a drop from last year’s 6.7 million. As a percentage of all mortgages, seriously underwater loans also dropped, accounting for 9.7 percent of all loans versus the 12 percent of Q1 2016.

Over the quarter, the news wasn’t as promising. Properties seriously underwater were up slightly from Q4 2016—moving from 5.4 million to 5.5 million. Underwater loans also made up a larger percentage of all mortgages, increasing from 9.6 percent in Q4 to 9.7 percent Q1.

Though the number of underwater properties has certainly improved over last year, according to Daren Blomquist, Senior Vice President of ATTOM Data Solutions, there are still some “stubborn” regions where negative equity is all-too-common.

“While negative equity continued to trend steadily downward in the first quarter, it remains stubbornly high in often-overlooked pockets of the housing market,” Blomquist said. “For example, we continue to see one in five properties seriously underwater in several Rust Belt cities along with Las Vegas and central Florida. Additionally, close to one-third of homes valued below $100,000 are still seriously underwater.”

These pockets are causing problems with local home values as well, Blomquist said.

“Several of the cities with the biggest quarterly increases in underwater properties saw a corresponding increase in share of distressed sales in the first quarter, creating a drag on overall home values,” Blomquist said, “and in the case of Baton Rouge that increase in distressed sales may be in part attributable to the catastrophic flooding there in August 2016. Across the country, the share of seriously underwater homes was higher in high-risk flood zones.”

Baltimore came in with the highest increase of underwater mortgages over the quarter, with a jump just under 27,000. Other cities to see significant rises were Philadelphia (8,919); McAllen, Texas (7,746); Cleveland (7,631); and St. Louis (6,844). States with the highest shares of seriously underwater properties were Nevada, Ohio, Illinois, Louisiana, and Missouri.

On the opposite end of the spectrum, ATTOM found that nearly 14 million properties were equity-rich for the quarter. Hawaii, California, New York, Vermont, and Oregon boasted the highest number of equity-rich properties in the nation.

To produce the Home Equity and Underwater Report, ATTOM analyzed publicly recorded mortgage and deed of trust data. View the full report at RealtyTrac.com.