Home Owners Still Holding Out For Equity

Several reports are showing home equity on the rise. In fact, home owners’ equity holdings at the end of the first quarter amounted to $10.8 trillion – the highest amount since late 2007, according to Federal Reserve reports. That number is below the $13.4 trillion reached in early 2006 during the housing bubble. However, if home prices rise about 5 percent in the next year – which many predict they will – researchers from CoreLogic estimate an additional 1.2 million home owners will regain equity.

While the home equity picture is looking brighter, many owners remain underwater, owing more on their mortgage than their home is currently worth. About 6.3 million home owners nationwide are underwater. On average, they owe 33 percent more than their house would sell for today. For households with one mortgage, the average negative equity balance is about $52,000. The average negative equity for two mortgages is about $75,000, according to CoreLogic.

Being underwater is preventing many from selling. For example, at the end of March, 1.6 million home owners had less than 5 percent of equity in their homes. Many home owners in that position would have to bring money to the settlement table or pay off the debt on their house before they could sell, housing analysts say.

The homes most likely to be in a negative equity position are lower-cost homes, according to research by CoreLogic. About 17 percent of homes costing less than $200,000 are in negative equity positions compared to 3 percent of homes costing more than $500,000.

Not surprisingly, areas that saw some of the biggest drops in home prices during the housing crisis tend to be the areas with the highest concentrated numbers of underwater home owners. For example, 29 percent of homes in Nevada are in a negative equity position; 27 percent in Florida; and 20 percent in Arizona. However, California has fared much better. In some of the state’s counties, home values sank by 50 percent or more during the housing crisis. But the state’s strong housing rebound has put its negative equity picture to just slightly above 11 percent.