San Francisco home prices are highest in the country – but so is their equity

By Britt Chester, INMAN Staff Writer
Published September 27th 2016

CoreLogic finds home value gains restoring negative equity nationwide

Key Takeaways

  • The percentage of negative equity homes dropped to 7.1 percent in the U.S., or roughly 3.6 million homes.
  • Economists at CoreLogic believe home prices will rise another 5 percent over the year, which would free up another 700,000 residential properties from negative equity.
  • San Francisco ranks no. 1 in the top five metros with the highest percentage of residences with equity, according to CoreLogic.

CoreLogic’s quarterly equity report shows 548,000 residential properties in the U.S. regaining equity in the second quarter of 2016, while the total number of mortgaged residential properties with equity sat at 47.2 million.

Of the 47.2 million mortgaged residential properties, 17 percent (8.7 million) were considered under-equitied, the report shows. This percentage of borrowers has less than 20 percent home equity.

17 Percent of US mortgaged homes are under-equitied

“Home value gains have played a large part in restoring home equity,” CoreLogic Chief Economist Dr. Frank Nothaft wrote in the report.

The CoreLogic Home Price Index showed 5.2 percent growth through June. Dr. Nothaft credits home price growth helping the number of negative equity properties to drop by 850,000 in the second quarter from the previous year.

There is even smaller percentage of near-negative equity properties. Near-negative equity refers to homes with less than 5 percent equity. Only 1.9 percent of properties are in this category, but they are at higher risk should home prices suddenly decline, according to CoreLogic.

However, the amount of negative equity homes dropped 8.9 percent over the quarter. The amount of homes underwater is only 7.1 percent of the total, or roughly 3.6 million homes.

 

 

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Nevada has the highest percentage of negative equity residential properties, at 15.3 percent of the total. Florida, Maryland, Illinois and Arizona round out the top five cities with the most negative equity.

Residential properties with equity account for 98.3 percent of all properties in Texas, which was good for best in the nation. Alaska, Colorado, Hawaii and Utah are also ranked in the top five.

“We see home prices rising another 5 percent in the coming year based on the latest projected national CoreLogic Home Price Index. Assuming this growth is uniform across the U.S., that should release an additional 700,000 homeowners from the scourge of negative equity,” CoreLogic President and CEO Anand Nallathambi said in the report.

The report also shows that the national average loan-to-value (LTV) ratio is 56 percent. The 700,000 homes Nallathambi is talking about are the 1.4 percent share of homes with LTV of 100 to 105 percent.

San Francisco

San Francisco ranks no.1 in the top five metros with the highest percentage of residences with equity, according to CoreLogic. The study counted approximately 260,000 properties in the metro and found 99.4 percent with equity. The city’s average LTV is 35.9 percent, which is pretty impressive given the seven-figure median home price.

To contrast, the state of California’s average LTV is 48 percent out of a pool of nearly 6.7 million properties.

 

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This post was written by Rumana Jabeen

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