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Negative Equity Hits Record Levels

home pricesThe amount of homes in negative equity fell to the lowest level in nine years, according to the latest CoreLogic Equity Report. Additionally, the amount of equity in mortgaged real estate increased by nearly $427 billion in the second quarter of 2019 from the second quarter of 2018, an annual increase of 4.8%.

CoreLogic notes that Q2’s increase in equity was the lowest such gain in equity since the fourth quarter of 2012. Despite the lower growth rate, borrower equity hit a new high in the second quarter of 2019, and borrowers have gained $5.9 trillion in equity since the end of 2011 when equity stopped declining.

The nationwide negative equity share for the second quarter of 2019 was 3.8% of all homes with a mortgage, the lowest share of homes with negative equity since CoreLogic started tracking it in the third quarter of 2009.  The number of underwater properties decreased by 201,000 from the second quarter of 2018 to the second quarter of 2019.

By state, Nevada’s 1.9-percentage-point decrease in negative equity between the second quarter of 2018 and the second quarter of 2019 represented the nation’s largest year-over-year decline, and the drop from a high of 72.7% in the first quarter of 2010 to 3.7% in the second quarter of 2019 represented the largest decline from the peak.

On a city level, San Francisco has the largest average amount of negative equity, but the negative equity share is only 0.6%. Miami has the smallest average amount of negative equity, but has a negative equity share of 9.4%, which is more than double the national rate.

Earlier this month, Black Knight reported that tappable equity rose for the second quarter in a row, gaining $335 billion in Q2 2019, now at an all-time high of $6.3 trillion.

“The not-so-good news is that – in an environment of record-high levels of tappable equity and low interest rates that makes cash-out refinances an affordable option for accessing that equity – servicers are retaining just one in five cash-out borrowers,” said Black Knight Data & Analytics President Ben Graboske. “Even though rate-term refis are surging right now, cash-outs still made up some 62% of all refinances in the second quarter. Add to that the fact that borrowers refinancing out of 2012-2017 vintage loans account for nearly half of all refis so far in 2019, nearly 80% were cash-out transactions.”

About Author: Seth Welborn

Seth Welborn is a Staff Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.
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