Equity growth among lower priced homes is falling behind more expensive segments as sales performance for more affordable homes declined on a quarterly basis.

Black Knight reported today that though negative equity rates continue to improve on the national level, the recovery is decidedly imbalanced regarding both home price levels and geography.  Borrowers whose homes are in the lowest tier of home prices continue to struggle with high negative equity rates. As of the end of 2015, there were still 3.2 million borrowers in negative equity positions nationwide, representing $126 billion in underwater first and second lien housing debt.

“Throughout 2015, the negative equity population in the U.S. decreased by over 30 percent, bringing another 1.5 million homeowners out from underwater on their mortgages,” said Black Knight Data & Analytics Senior Vice President Ben Graboske. “However, even after four years of improvement, the recovery has not reached all corners. When we looked at the population by home price levels, we found that over half of the nation’s underwater properties are in the lowest 20 percent of their respective markets. That is the highest share on record. In fact, while the national negative equity rate is now 6.5 percent, for homes in the lowest price tier, it’s over 16 percent.

“Furthermore, this group is seeing a slower recovery than the nation as a whole. At the current rate of improvement, it would take more than five years for the negative equity rate in this lowest price tier to reach 2005 levels – roughly two-and-a-half years longer than homes in the top 20 percent,” Graboske said.

 

The data also showed variation in negative equity improvement at the geographic level. In Nevada, where the Black Knight Home Price Index shows home prices still 34 percent below their peak, over 14 percent of borrowers are still underwater on their mortgages, the largest share in the nation. By volume, Florida leads the country with just under 500,000 underwater borrowers. Missouri was the only state to see its underwater population actually rise in 2015, due to falling home prices in the state.

As was reported in Black Knight’s most recent First Look release, other key results include:

Total U.S. loan delinquency rate:

4.45%

Month-over-month change in delinquency rate:

-12.57%

Total U.S. foreclosure pre-sale inventory rate:

1.30%

Month-over-month change in foreclosure pre-sale inventory rate:

– 0.64%

States with the highest percentage of non-current* loans:

MS, NJ, LA, NY, ME

States with the lowest percentage of non-current* loans:

AK, SD, MN, CO, ND

States with the highest percentage of seriously delinquent** loans:

MS, LA, AL, AR, M

 

Clear Capital:  Affordable home sales lag

Sales are also lagging among lower priced homes, according to Clear Capital’s April Market Report.

The lowest price tier (lowest 25% of home sales) have recently dominated the mid (middle 50% of home sales) and top (highest 25% of home sales) tiers in terms of quarter over quarter growth, but the most recent quarterly growth figures show all three tiers hovering around the 0.5% mark. Tier by an average of 1.5%, even reaching a difference of 2.0% in November 2014.

“As the winter real estate seasonal slowdown seems to be winding down, we are beginning to see two very different ends of the national market, the low and top tiers, start to converge potentially toward a more homogenous pattern of growth. Although this drop in performance for the low price tier may indicate a more sustainable model of affordability for first-time homebuyers, it may also plant doubt and uncertainty, especially with the investors — such as the REO to rental investors — who have previously taken advantage of the rapid growth of the tier. Even as price growth for all tiers remains in the black, it may be time for investors to find a new niche in the industry. Perhaps we will see REO or rental investments take a rise,” said Alex Villacorta, Ph.D., vice president of research and analytics at Clear Capital.