The third-quarter 2014 figure rose slightly, however, from the second quarter of 2014, when 6.7 percent, or 31,652, of the homes in the Charlotte-Gastonia-Concord metropolitan statistical area carried negative equity. In the third quarter, that figure was 32,244 homes.
Negative equity means that borrowers owe more on their mortgages than their homes are worth. The situation can occur because of a decline in real estate value, an increase in mortgage debt, or a combination of both.
The CoreLogic report found that an additional 3 percent of area homeowners with a mortgage in the third quarter had near-negative equity, or less than 5 percent equity in their homes. The number of Charlotte area homes in near-negative equity decreased from the previous year, when 4.1 percent of homeowners with a mortgage had less than 5 percent equity in their properties.
The number of mortgages that were near negative equity in the second quarter of 2014 was 2.9 percent.
John Chesser, senior analyst at UNC Charlotte Urban Institute, says he believes the year-over-year decline in negative and near-negative equity reflects the steady recovery in the overall housing market, and strong growth in the local employment rate, which has boosted Charlotte-area home sales.
“The rise in negative equity during the recession was a natural consequence of the rapid drop in home values,” Chesser said. “Now, lending is tighter, so new home purchases result in a more solid equity position for purchasers and the overall rise in prices is helping reduce the negative equity situation that existing owners have been in over the last few years.”
Nancy Braun, owner and broker-in-charge of Showcase Realty in Charlotte’s South End, agrees. She attributes the drop in negative equity to a strong appreciation in housing prices, which is a reflection of the local economy.
“Plus,” she said, “We still have investors purchasing in the Charlotte-area market, which has bumped up prices as well. Low inventory is also boosting higher offers.”
The local housing market is catching up to pre-recession values, she said, and is likely to continue improving for the foreseeable future.
Overall, North Carolina ranked 30th in home equity share, with about 68 percent of all mortgaged properties having a loan-to-value ratio of under 80 percent and about 27 percent showing a loan-to-value ratio of between 80 and 100 percent of the price of the home.
The CoreLogic report determined the equity of the properties by comparing their current market value against the outstanding balance of mortgage debt. Using public records, the company included both first mortgages and second liens on the 49 million U.S. residential properties that have loans.
In comparison to other states, North Carolina ranked 24th when the report measured negative and near-negative equity for residential mortgages. Roughly 8 percent of all North Carolina residential loans were underwater and an additional 4 percent of mortgaged properties had less than 5 percent equity.
Nearly 273,000 residential properties nationwide returned to positive equity in the third quarter of last year, CoreLogic said. Approximately 5.1 million homes, or 10.3 percent of all residential properties with a mortgage, were still in negative equity as of the third quarter, down from 13.3 percent, or 6.5 million homes, in the same period in 2013. The report also saw an improvement from the second quarter of 2014, when 5.4 million homes, or 10.9 percent of all residences with a mortgage, were upside-down.
Other findings from the report include:
- Nevada had the highest percentage of negative equity, at 23.8 percent, followed by Arizona, 19 percent; Rhode Island, 14.8 percent; and Illinois, 14.1 percent.
- The metro areas where mortgaged residential properties had the highest rates of negative equity were Tampa-St. Petersburg-Clearwater, Fla., at 25.5 percent; Phoenix-Mesa-Scottsdale, Ariz., at 19.3 percent; Chicago-Naperville-Arlington Heights, Ill., at 16.3 percent; and Riverside-San Bernadino-Ontario, Calif., at 15 percent.
- Roughly 3 million underwater borrowers hold first liens without home equity loans. The average mortgage balance for this group of borrowers is $230,000; the average underwater amount is $58,000.
- About 2.1 million underwater borrowers hold both first and second liens. The average mortgage balance for this group of borrowers is $299,000; the average underwater amount is $78,000.
- Texas had the highest percentage of mortgaged residential properties in an equity position, at 97.4 percent, followed by Alaska, 97.1 percent; Montana, 97.1 percent; Hawaii, 96.4 percent; and North Dakota, 96.1 percent.