According to CNBC, “the number of borrowers who owe more on their mortgages than their homes are worth fell to the lowest level in eight years, but those who are still underwater are drowning faster than ever in foreclosure.”
During the first-quarter of this year, it had been announced that approximately 1.6 million borrowers returned to a position of . The amount of homes that are no longer underwater is due largely in part to recent appreciation rates. The expansion of the economy has enabled home prices to grow for about three years now. That said, more than 4 million borrowers, or 8 percent of all homeowners with a mortgage, remain underwater. That is to say that they owe more than the actual property is worth.
Today’s foreclosure numbers represent a 30 percent decrease from the same time last year. Over the course of 12 months, appreciation has returned a great deal of equity to those who never thought they would see it again. However, growth in home prices can be seen on a local level. While more people are in fact in a position of positive equity, the numbers are considerably higher in states where values fell the most during the housing crash. Two states, in particular, are worse off than any others. The rate of negative equity in Nevada is about 16 percent, whereas Florida has a rate of 15 percent. Las Vegas could provide answers at a more local level.
The return of equity to markets across the country is a welcomed sight. However, the areas consisting of higher tax bracket individuals are the ones seeing the most benefits. Borrowers whose homes fall into the lowest 20 percent of home values are nine times more likely to be underwater than those in the top fifth, according to Black Knight.
It is no secret that negative equity is the most common reason homeowners fall into foreclosure. In fact, two-thirds of all foreclosures in the country are a direct result of underwater homeowners.
“One of every 3 borrowers in active foreclosure has a current loan-to-value ratio of 150 or more, meaning they owe 50 percent more than their homes are worth,” Black Knight’s Ben Graboske said.
In lieu of this information, it is apparent that there are still a lot of households that need help. Nonetheless, it is hard to argue that the housing market has not made significant improvements. So-called hot markets are seeing equity grow at an exponential pace, whereas negative equity is driving foreclosures in the lowest-priced markets. The disconnect appears to be growing with no end in sight.
Despite the rate of foreclosure being at its lowest level in nearly a decade, traditional lending institutions are starting to foreclose on properties at a faster pace in areas void of equity. In fact, areas where home prices only grew modestly are even seeing an increase in foreclosure activity. While foreclosures jumped 17 percent in the last year on a national level, the markets were price growth was tempered saw a lot more repossessions.
“The March increase is continued cleanup of distress still lingering from the previous housing crisis; not the beginning of a new crisis by any means,” said RealtyTrac vice president Daren Blomquist. “Some of most stubborn foreclosure cases are finally being flushed out of the foreclosure pipeline, and we would expect to see more noise in the numbers over the next few months as national foreclosure activity makes its way back to more stable patterns by the end of this year.”
The following states represent where repossessions increased the most:
- Ohio
- Maryland
- Missouri
- New Jersey
- Illinois
