Further deterioration of home values have pushed a large number of home owners to be underwater. This means borrowers owe more on their properties than they are current worth, and it’s impeding home sales, according to new data by CoreLogic.
Approximately 10.9 million, or 22.5 percent, of all residential properties with a mortgage were in negative equity at the end of the second quarter, down slightly from 22.7 percent in the first quarter, CoreLogic reports. What’s more, about 2.4 million borrowers had less than 5 percent equity, which CoreLogic refers to as near-negative equity, in the second quarter.
The typical seasonal changes in sales volume in high negative equity ZIP codes is very muted, which indicates that nondistressed sales are being heavily impacted by the high levels of negative equity in their neighborhood, even if sellers have equity, according to CoreLogic’s report.
High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery, says Mark Fleming, chief economist with CoreLogic. The hardest hit markets have improved over the last year, primarily as a result of foreclosures. But nationally, the level of mortgage debt remains high relative to home prices.