Recent data shows that more than half of all homes currently underwater are in the bottom 20% of home prices
While the number of underwater borrowers has been in decline for the last few years, negative equity is still an issue among lower-priced homes, according to data released Monday.
According to Black Knight Financial Services’ latest Mortgage Monitor report, there were 3.2 million underwater borrowers at the end of 2015, representing about 6.5% of all residential mortgages. That’s a 31% decrease from 2014.
However, more than half of underwater homes were in the bottom 20% of home prices, according to Black Knight.
“Throughout 2015, the negative equity population in the U.S. decreased by over 30%, bringing another 1.5 million homeowners out from underwater on their mortgages,” said Ben Graboske, Black Knight senior vice president for data and analytics. “However, even after four years of improvement, the recovery has not reached all corners. When we looked at the population by home price levels, we found that over half of the nation’s underwater properties are in the lowest 20% of their respective markets. That’s the highest share on record. In fact, while the national negative equity rate is now 6.5%, for homes in the lowest price tier, it’s over 16%. Furthermore, this group is seeing a slower recovery than the nation as a whole. At the current rate of improvement, it would take more than five years for the negative equity rate in this lowest price tier to reach 2005 levels—roughly two-and-a-half years longer than homes in the top 20%.”
As an example, Black Knight looked at the city of Detroit. In that market, lower-priced homes were 33% more likely to be underwater than high-priced homes. And lower-priced homes are still worth 35% less than they were at their peak in 2006, while higher-priced homes have recovered to within 7% of their peak value.
Black Knight also found that more than half of all negative equity originated during the housing bubble, between 2005 and 2007.
According to Black Knight Financial Services’ latest Mortgage Monitor report, there were 3.2 million underwater borrowers at the end of 2015, representing about 6.5% of all residential mortgages. That’s a 31% decrease from 2014.
However, more than half of underwater homes were in the bottom 20% of home prices, according to Black Knight.
“Throughout 2015, the negative equity population in the U.S. decreased by over 30%, bringing another 1.5 million homeowners out from underwater on their mortgages,” said Ben Graboske, Black Knight senior vice president for data and analytics. “However, even after four years of improvement, the recovery has not reached all corners. When we looked at the population by home price levels, we found that over half of the nation’s underwater properties are in the lowest 20% of their respective markets. That’s the highest share on record. In fact, while the national negative equity rate is now 6.5%, for homes in the lowest price tier, it’s over 16%. Furthermore, this group is seeing a slower recovery than the nation as a whole. At the current rate of improvement, it would take more than five years for the negative equity rate in this lowest price tier to reach 2005 levels—roughly two-and-a-half years longer than homes in the top 20%.”
As an example, Black Knight looked at the city of Detroit. In that market, lower-priced homes were 33% more likely to be underwater than high-priced homes. And lower-priced homes are still worth 35% less than they were at their peak in 2006, while higher-priced homes have recovered to within 7% of their peak value.
Black Knight also found that more than half of all negative equity originated during the housing bubble, between 2005 and 2007.
