The FINANCIAL -- ATTOM Data Solutions on August 11 released its Q2 2016 U.S. Home Equity and Underwater Report, which shows 6,666,622 seriously underwater properties representing 11.9 percent of all U.S. properties with a mortgage as of the end of the second quarter 2016 — down from 12.0 percent in the previous quarter and down from 13.3 percent in Q2 2015.
For the report, ATTOM analyzed recorded mortgage and deed of trust data from more than 1,400 U.S. counties accounting for 88 percent of the U.S. population along with automated valuation models (AVMs) for more than 56 million properties with mortgages in those counties (see full methodology below).
“Rising home prices are lifting all home equity boats: bailing out seriously underwater homeowners and enriching homeowners who already have positive equity,” said Daren Blomquist, senior vice president at ATTOM Data Solutions (the new parent company of RealtyTrac). “Nationwide home prices reached a new all-time high in June on the heels of 52 consecutive months of annual increases. While that national trend is consistent in most markets across the country, there are still some local markets and sub-markets that have been largely left behind by the housing recovery and which still have a high percentage of underwater homeowners.”
The number of seriously underwater properties (those with an LTV of 125 percent or more) decreased by 37,235 compared to the first quarter and decreased by 776,958 compared to a year ago. Since the peak of 12.8 million in Q2 2012, the number of seriously underwater properties has decreased by more than 6.1 million.
There were a total of 12,383,345 equity rich properties (LTV of 50 percent or less) representing 22.1 percent of all U.S. properties with a mortgage at the end of Q2 2016 — up from 22.0 percent in the previous quarter and 19.6 percent in Q2 2015. The number of equity rich properties increased by 47,694 compared to the previous quarter and increased by more than 1.4 million compared to a year ago.
Cleveland, Las Vegas, Akron post highest underwater rates
Among 88 metropolitan statistical areas analyzed for the report with a population of 500,000 or more and sufficient data, those with the highest share of seriously underwater properties were Cleveland, Ohio (27.5 percent); Las Vegas (25.7 percent); Akron, Ohio (24.9 percent); Dayton, Ohio (24.1 percent); and Toledo, Ohio (23.6 percent).
Other major markets with a population of 2 million or more where the share of seriously underwater homeowners exceeded 15 percent included Chicago (22.5 percent); Detroit (21.3 percent); Kansas City (21.2 percent), Orlando (19.1 percent), St. Louis (17.8 percent), Tampa-St. Petersburg (17.8 percent), Miami (17.3 percent), Baltimore (16.4 percent), and Cincinnati (15.6 percent).
“South Florida continues to see an equity improvement greater than the national average due to our strong growth,” said Mike Pappas, CEO and president at the Keyes Company, covering the South Florida market. “Our underwater homes saw a 3-x improvement over the average with the high equity owners experiencing a 1.8-x improvement. With our limited land and strong in-migration we will continue to see improvement in equity.”
States with the highest percentage of seriously underwater properties were Nevada (22.2 percent), Illinois (22.1 percent), Ohio (20.9 percent), Indiana (18.6 percent), and Missouri (18.2 percent).
Zip codes where more than two-thirds of properties are seriously underwater
Among 9,844 U.S. zip codes with at least 2,500 total properties, those with the highest share underwater at the end of Q2 2016 were 63137 in the St. Louis metro area (79.8 percent); 60827 in the Chicago metro area (76.3 percent); 08611 in the Trenton, New Jersey, metro area (75.8 percent); 60419 in the Chicago metro area (74.6 percent); and 48235 in the Detroit metro area (73.3 percent).
Other zip codes with at least two-thirds of properties seriously underwater included zip codes in Milwaukee, Columbus, Ohio, and Las Vegas. There were a total of 29 U.S. zip codes with more than two-thirds of properties seriously underwater as of the end of Q2 2016.
San Jose, San Francisco, Portland post lowest underwater rates
Metro areas with the lowest share of seriously underwater properties were San Jose, California (1.7 percent); San Francisco, California (3.7 percent); Portland, Oregon (3.9 percent); Austin, Texas (3.9 percent); and Oxnard-Thousand Oaks-Ventura, California (4.1 percent);
Other markets with a population of 1 million or more where the share of seriously underwater properties was below 10 percent included Denver (4.1 percent); San Diego (4.8 percent); Los Angeles (5.0 percent); Seattle (5.5 percent); Minneapolis-St. Paul (5.5 percent); Houston (5.7 percent); Dallas-Fort Worth (6.0 percent); San Antonio (6.4 percent), Pittsburgh (7.2 percent), and Sacramento (8.3 percent).
“Since the middle of 2013, the greater Seattle area has seen an impressive 73 percent drop in the number of homes that are seriously underwater,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market. “We owe this drop to our rapidly expanding economy and very limited supply of homes for sale, which has pushed home prices up dramatically. Given this rapid increase in prices, we’ve seen a 72 percent increase in the number of homes that are now considered equity rich in the Seattle area.”
Profile of seriously underwater properties and their owners
ATTOM matched the home equity data against property and ownership characteristic data — including occupancy status, market value, property tax rate, ownership description and congressional district — to provide a profile of the who, what, when, where and why for seriously underwater properties.
Property value: 34.4 percent of properties with an estimated market value up to $100,000 are seriously underwater compared to just 4.9 percent of properties with an estimated market value above $750,000.
Loan vintage: 26.4 percent of properties with a loan originated between 2004 and 2008 are seriously underwater compared to 8.3 percent with a loan originated since 2009.
Occupancy status: 21.8 percent of non-owner occupied properties are seriously underwater compared to 9.1 percent of occupied properties.
Ownership type: 43.5 percent of properties owned by a Company/Corporation/Incorporated owner are seriously underwater compared to 10.1 percent of properties owned by a husband and wife.
Property tax rate: 21.4 percent of properties with an effective property tax rate above 2 percent of market value are seriously underwater, compared to 11.8 percent of properties with an effective property tax rate below 1 percent.
Political party: 13.1 percent of properties located in a congressional district with a Democrat representative are seriously underwater compared to 10.8 percent seriously underwater in a congressional district with a Republican representative