In addition to massive foreclosure rates, the aftermath of the real estate market crash of nearly a decade ago also forced many homeowners into a negative equity situation. To make matters worse, many of these homes had been purchased at the very top of the real estate bubble. When it burst, those with sufficient income or resources to avoid foreclosure found themselves suddenly burdened with a home mortgage that far exceeded their home’s newly assigned after market crash value. For many, this meant staying in a home that no longer suited their needs for years longer than their original plan. Those that were forced to move for work or other reasons were likely forced to sell at a loss and cover the difference, or consider riskier options, such as becoming a long-distance landlord or selling to a cash-strapped buyer in a lease-purchase agreement.
On the Gain, Once Again
Negative equity on residential real estate actually saw its peak of 26 percent in the fourth quarter of 2009, shortly after the bubble burst and property values dropped like rocks in the newly devastated real estate market. With slightly more than one in every four homeowners suddenly upside down in their mortgage, property loans of all types experienced significant pain. Recent statistics compiled for 2016, however, offer very positive news for the real estate industry, as a whole, with 93.8 percent of mortgaged homes now having moved into a positive equity position.
Highlighting the Gains
While home equity gains improved on a national level, the highest levels of gains occurred in areas with higher end markets and faster appreciation rates. According to CoreLogic’s study, Oregon ( with 10.2 percent increase) and Washington (with a 10.3 percent increase) offered the biggest positive equity gains in 2016, approximately doubling the gains experienced in the rest of the nation. Even California, where concerns about droughts, flooding, and wildfire have made the news on a daily basis, experienced a healthy 5.8 percent gain in positive equity figures for residential mortgage holders of the state.
Other states showing positive equity gains as of the fourth quarter of 2016 that are worth noting, especially for those interested in real estate investment loans include:
Negative Equity Still a Factor in Some Metropolitan Areas
While nationwide positive equity gains are good news, some of the nation’s largest metro areas are still experiencing uncomfortably high negative equity numbers. These areas and their negative equity rates for 2016, as determined by the CoreLogic study, included:
Positive Equity Offers Positives for Investors
In March, the Federal Reserve made the first of the three interest rate increases expected to take place during 2017. While each such rate increase is likely to have investors relying more heavily on rental property calculators, the current increases in positive equity may offer some relief as homeowners who have been waiting to move now decide to delve into the market. Overall, positive equity gains are likely to also help investors who are looking to liquidate some of their holdings at a profit or those who decide to use them as collateral to obtain other investment property loans.