Homeowners get control of spike of seriously underwater mortgages

At the same time alarm bells are going off about subprime car loans and delinquency rates there was some good news out of the Tri-Cities housing sector.

The number of homeowners with underwater mortgages has dropped to a two-year low, and those who are equity rich have plateaued at a one-in-five rate.

According to Attom Data Solutions third-quarter Home Equity and Underwater Report, there were 90,926 mortgaged properties in local counties included in the report that were seriously underwater and 20,044 that were equity rich. Seriously underwater is defined as a property with a loan to value ratio of 125%, meaning the owner owed at least 25% more than the estimated market value of the property. Equity rich is defined as a loan to value ratio of 50% or lower, meaning the owner had at least 50% equity.

Local housing market watchers have been closely watching the underwater mortgage numbers because they began increasing in Q3 of 2017 than sharply increased in Q1 2018 to a level of what they were seven years ago. Since then, the number has come back down to the 2016 and early 2017 levels. The median number of underwater mortgages for the last 22 quarters is 9,999. The Q3 total was 9,926.

Despite the good news about the local improvement, the bad news is the share of total mortgaged properties that were of underwater in NE Tenn. remains considerably higher than the state or national levels. While that’s seen as an economic stress flag in the housing market it doesn’t necessarily mean that those properties will move in the first stages of foreclosures. Currently, local foreclosure rates have returned to pre-recession levels of about 0.5%.

There were 20,044 local properties in the equity rich class during the third quarter. That’s slightly below the 22 quarter median of 27,463 and slightly below the nation 26.7% share. The number of local equity rich properties has declined in the past three years as owners dipped into that equity for property upgrades or to trade up or scale back from their primary residence. Others put that equity to other uses.

“The latest numbers reveal another profound impact of the extended housing boom, as far more homeowners find themselves on the right side of the balance sheet instead of the wrong side. This is a complete turnabout from what was happening when the housing market crashed during the Great Recession,” said Todd Teta, chief product officer with Attom. “There are notable equity gaps between regions and market segments. But as home values keep climbing, homeowners are seeing their equity building more and more, while those with properties still worth a lot less than their mortgages represent just a small segment of the market.”

Here’s a drill down on the share of total properties that were equity rich in the local counties included in Attom’s analysis.

Carter – 21.2%.

Greene – 21.5%.

Hawkins – 20.6%.

Johnson – 26.9%.

Sullivan – 25.8%.

Unicoi – 21.7%.

Washington Co. TN – 20.7%

Washington Co. VA – 22.4%.

Tennessee – 22.9%.

U.S. – 26.7%.

The share of total mortgaged properties that were seriously underwater in the local counties included in Attom’s analysis were:

Carter – 13.6%.

Greene – 14.6%.

Hawkins – 14.4%.

Johnson – 17.8%.

Sullivan – 7.9%.

Unicoi – 12.3%.

Washington Co TN – 9.5%.

Washington Co. VA – 13.7%.

Tennessee 8.7%.

U.S. – 6.5%.

Categories: REAL ESTATE