The Current Imbalance of Equity
The good news: Negative equity has plunged to rates that were last seen in 2006. The bad news: Not all home owners have seen a drastic improvement in equity.
Home owners who are still underwater on their mortgage are more likely to fall at certain home price levels and geography, according to a new report released by Black Knight Financial Services.
Read more: Seniors See Their Home Equity Soar
In total, 6.5 percent of all home owners with a mortgage – or about 3.2 million -- remain underwater, owing more on their mortgage than their home is currently worth. More than half of underwater homes fall in the bottom 20 percent of homes by price in their markets.
Black Knight Financial Services acknowledges there has always been a disparity between the top and bottom 20 percent price tiers with negative equity, but the recent gap is the highest share on record.
Negative equity among lower priced homes has shown some improvement in recent years. It has fallen by 25 percent over the last 12 months alone. But it has lagged when compared to other price tiers.
"Throughout 2015, the negative equity population in the U.S. decreased by over 30 percent, bringing another 1.5 million home owners out from underwater on their mortgages,” says Ben Graboske, Black Knight data and analytics senior vice president. “However, even after four years of improvement, the recovery has not reached all corners. … [The lower tier] is seeing a slower recovery than the nation as a whole.”
Negative equity is also more evident in certain locations. For example, in Nevada, Black Knight’s home price index shows that home prices still remain 34 percent below its peak. More than 14 percent of borrowers there are still underwater on their mortgages, the highest share in the nation. Florida, however, has the highest number of borrowers in negative equity at just under a half million.
Source: “Equity Gains Uneven, Depending on Price Point and Geography,” Mortgage News Daily (April 4, 2016)
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