As the housing market regains momentum nationwide, the number of seriously underwater homes continues to drop. Meanwhile the rise in home values in a number of markets has helped bolster equity for many homeowners, presenting viable options for those having a difficult time meeting their mortgage payments.
According to Realty Trac's Q3 2015 U.S. Home Equity & Underwater Report, the end of the third quarter saw 6,917,673 U.S. residential properties seriously underwater, representing 12.7 percent of all properties with a mortgage. This number was down from 7,443,580 seriously underwater homes or 13.3 percent of all homes with a mortgage in the second quarter and the lowest level since RealtyTrac began tracking this data in 2012.
The number and share of seriously underwater homes peaked in the second quarter of 2012 at 12,824,729, representing 28.6 percent of all homes with a mortgage. Seriously underwater homes are those where the combined loan amount secured by the property is at least 25 percent higher than the property's estimated market value.
The share of distressed properties, those in some stage of the foreclosure in the third quarter, was also at the lowest level since 2012, with 33.4 percent of distressed properties seriously underwater, down 1 percent from the previous quarter and down 5.5 percent year-over-year. Conversely, the share of properties in foreclosure with positive equity increased to 43.4 percent in the third quarter, up slightly from 42.4 percent in the second quarter and up from 38.5 percent in Q3 2014.
Among metropolitan statistical areas with a population of at least 500,000, those with the highest share of equity rich residential properties with a mortgage were San Jose, California (43.9 percent), San Francisco (37.9 percent), Honolulu (36.5 percent), Los Angeles (32.1 percent) and New York (30.4 percent).
Major markets where the share of properties in foreclosure with positive equity exceeded 60 percent included Denver, Colorado (85.9 percent), Austin, Texas (83.3 percent), Honolulu, Hawaii (79.5 percent), Scranton, Pennsylvania (77.8 percent), San Jose, California (77.3 percent), Pittsburgh, Pennsylvania (75.9 percent), McAllen, Texas (75.6 percent), Baton Rouge, Louisiana (71.6 percent) and Nashville, Tennessee (71.4 percent).
The escalating prices in these markets afford homeowners more options today compared to a few years ago, said Christ Isaacson, president of the Silicon Valley Association of REALTORS®. "Families who were able to hold on to their home during the downturn are now seeing some gains in equity. With still low interest rates and higher property values, they may be able to refinance, pay down their debts, or cash out," said Isaacson.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
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