Seriously underwater properties down significantly in Q3 2017

More than 800,000 homes in the United States shed the worst type of negative equity in the third quarter of 2017, according to the real estate database ATTOM Data Solutions.

In first U.S. Home Equity and Underwater Report for the quarter, the company determined that 4.63 million homes were seriously underwater. A home is considered seriously underwater if its loan-tovalue ratio is 125 percent or greater. In this situation, the combined total of the loans secured by the property are at least 25 percent higher than the home's estimated fair market value.

The total of seriously underwater homes was down 14.7 percent from the previous quarter's total of 5.42 million. It also marked a drop of 23.6 percent—1.4 million homes—from the third quarter of 2016, the largest year-over-year decrease since the second quarter of 2015.

"Accelerating home price appreciation this year is increasing the velocity at which seriously underwater homeowners are recovering home equity lost during the Great Recession," said Daren Blomquist, senior vice president at ATTOM Data Solutions. "Median home prices nationwide are up 9.4 percent so far in 2017, the fastest pace of appreciation through the first three quarters of a year since 2013. Continued home price appreciation is also helping to grow the number of equity rich homeowners across the country compared to a year ago."

A total of 8.7 percent of mortgaged U.S. residences were considered seriously underwater in the third quarter of 2017. This was down from 9.5 percent in the second quarter of the year and 10.8 percent in the third quarter of 2016.

Seriously underwater homes were most common in Louisiana, where nearly one in five mortgaged residences—19.2 percent— fell into this category. Baton Rouge had the most seriously underwater properties among the 93 metropolitan statistical areas with a population of 500,000 or more, with 20.5 percent of the city's homes considered seriously underwater. The share stood at 17.4 percent in New Orleans, the fourth highest among these metro areas.

Other states with a large share of seriously underwater properties included Iowa (14.2 percent), Pennsylvania (14 percent), Mississippi (13.8 percent), and Alabama (13.7 percent). In addition to the Louisiana cities, the metro areas with the highest share of seriously underwater homes were Scranton, Pa. (19.5 percent), Youngstown, Ohio (18.2 percent), and Dayton, Ohio (16.4 percent).

ATTOM Data Solutions also determined the following shares for seriously underwater properties in southeastern Connecticut in the third quarter of 2017:

8 percent in Ledyard, a year-over-year increase of 8 percent

9.6 percent in Mystic, a year-over-year increase of 3 percent

21.3 percent in New London, a yearover-year decrease of 4 percent

6.5 percent in Niantic, unchanged from the third quarter of 2016

19.5 percent in Norwich, a year-overyear decrease of 6 percent

11.6 percent in Old Lyme, a year-overyear increase of 12 percent

10.3 percent in Waterford, a year-overyear increase of 1 percent

A total of 14.03 million mortgaged properties were considered equity rich. These properties have a loan-to-value ratio of 50 percent or lower, indicating that the owner is enjoying equity equal to at least half the home's fair market value.

The number of equity rich properties grew by 905,000 from the previous year, although it was also down by about 10,000 properties compared to the second quarter of 2017. Equity rich properties represented 26.4 percent of all mortgaged U.S. properties, up from 24.6 percent in the previous quarter and 23.4 percent in the previous year.

Hawaii had the largest share of equity rich properties at 41.9 percent, followed closely by California at 41.4 percent. The cities with the largest equity rich shares were all located in these states, with 61 percent of San Jose properties being defined as equity rich. This was followed by San Francisco (56.4 percent), Los Angeles (45.3 percent), Honolulu (43.9 percent), and Oxnard-Thousand Oaks-Ventura, Calif. (38.7 percent).

New York had the third largest equity rich share among states, with 35.7 percent of its mortgaged properties falling into this category. This was followed by Oregon (34 percent) and Washington (33.6 percent).

ATTOM Data Solutions draws from a database of more than 150 million residential and commercial properties in the United States. It has consistently logged a higher negative equity share than CoreLogic, a real estate analytics company which also releases quarterly reports on home equity. In its report for the second quarter of 2017, CoreLogic determined that only 5.4 percent of mortgaged properties in the U.S. are worth less than their outstanding loans.