850,000 Homeowners Climb Out of Underwater Mortgages

underwater home During the recent housing downturn, borrowers nationwide saw the value of their homes slip so considerably that they ended up owing more on their mortgages than the properties were worth. However, that trend has slowly been reversing itself for some time, thanks to the market’s turnaround, and that continued into the first quarter of the year.

Some 850,000 homeowners across the country saw their underwater mortgages move back into positive equity as prices continued to rise nationwide between January and March, according to the latest data from residential analytics company CoreLogic. In total, that brings the total number of consumers with mortgage balances and positive equity to 39 million.

Meanwhile, the firm’s data indicated another 9.7 million people — accounting for slightly less than one in five residential properties with mortgages — are still dealing with negative equity, and their properties are worth a total of about $580 billion.

However, that decline in negative equity was actually rather substantial. In the previous quarter, 10.5 million people (21.7 percent of homeowners) were underwater on their mortgages, the report said.

“The negative equity burden continues to recede across the country thanks largely to rising home prices,” said Anand Nallathambi, president and CEO of CoreLogic. “We are still far below peak home price levels, but tight supplies in many areas coupled with continued demand for single family homes should help us close the gap.”

Danger Still Exists

Unfortunately, though, many of the consumers who saw improvements in home values so large that they moved above water on their home loans may still be in some amount of danger, the report said. Under-equitied properties — considered to be those with less than 20 percent equity overall — still accounted for 11.2 million consumers nationwide, and of that number 2.1 million had equity of less than 5 percent. Those people, in particular, are vulnerable to fluctuations in the housing market that can potentially drag them back underwater (though many experts consider this to be unlikely on a national level).

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Home prices are expected to keep rising for most of the rest of the year at the very least. Continual economic improvements observed nationwide will likely encourage more buyers to continue entering the housing market, driving prices higher, even as interest rates creep up and affordability continues to decline overall.

Image: iStockphoto