Economic growth is improving the loan-to-value ratios for homeowners in bigger homes in wealthy high-tech cities, but homeowners in the Rust Belt and other impoverished regions are drowning with mortgage balances greater than their home's value, according to a report released Thursday by ATTOM Data Solutions.
The Irvine, Calif., company found 6.7 million homeowners seriously underwater in the second quarter with loans at 125% or more of their home's value. That's down 4% from a year ago, and about half of its peak of 12.8 million in 2012′s second quarter.
In a separate survey released Thursday, ATTOM found 86,201 foreclosures in July, or one foreclosure for every 1,540 homes. It was the lowest number of foreclosures since December 2005 before the housing bubble burst.
Rising home prices was the major factor relieving debt pressures in most markets. An ATTOM report released July 28 showed U.S. home prices reached a new all-time high in June on the heels of 52 consecutive months of annual increases.
One result is that seriously underwater homeowners represented 12% of all U.S. houses in the second quarter, down from 29% in 2012's second quarter.
"By the end of the year, we'll be flirting with under 10% nationwide," ATTOM Data Solutions SVP Daren Blomquist said.
Among the 88 metro areas with populations of 500,000 or more, those with the best loan-to-value ratios were: San Jose, Calif. (2%); San Francisco (4%); Portland, Ore. (4%); Austin, Texas (4%); Oxnard-Thousand Oaks-Ventura, Calif. (4%) and Denver (4%).
"The common denominator is those tend to have a lot of high-tech jobs and attract a lot of young workers who are getting high-paying technical jobs in those markets. They're your core first-time home buyers," Blomquist said.
The large number of affluent buyers is raising home prices in those areas, especially places like Seattle where the number of homes for sale has not kept pace with demand. Less than 6% of Seattle's homes were seriously underwater in the second quarter, 73% fewer than in mid-2013.
"We owe this drop to our rapidly expanding economy and very limited supply of homes for sale, which has pushed home prices up dramatically," Matthew Gardner, chief economist for the Seattle-based Windermere Real Estate, said.
Homeowners stuggling to pay off mortgages bigger than their house's value were concentrated in Rust Belt cities, central Florida and Las Vegas. Foreclosures followed a similar pattern.
"That's where we're seeing the lingering negative effects of the housing downturn," Blomquist said. "For those pockets, there's not a lot of light at the end of the tunnel at this point."
Those big metro areas with the highest share of seriously underwater properties were: Cleveland (28%); Las Vegas (26%); Akron, Ohio (25%); Dayton, Ohio (24%) and Toledo, Ohio (24%).
ATTOM found these common traits in metro areas with high numbers of underwater homeowners:
- Property value: 34% of properties with an estimated market value up to $100,000 are seriously underwater compared to just 5% of properties with an estimated market value above $750,000.
- Loan vintage: 26% of properties with a loan originated between 2004 and 2008 are seriously underwater compared to 8% with a loan originated since 2009.
- Occupancy status: 22% of non-owner occupied properties are seriously underwater compared to 9% of occupied properties.
- Ownership type: 43% of properties owned by a corporate investor are seriously underwater compared to 10% of properties owned by a husband and wife.
Among the 50 largest metro areas, those with the highest ratios of foreclosures to housing units were: Tampa-St. Petersburg-Clearwater, Fla. (1:698); Philadelphia-Camden, N.J.-Wilmington, Del. (1:699); Baltimore-Columbia-Towson, Md. (1:714); Las Vegas-Henderson-Paradise, Nev. (1:718); Jacksonville, Fla. (1:724); Miami-Fort Lauderdale-West Palm Beach, Fla. (1:741); Riverside-San Bernardino-Ontario, Calif. (1:810); Chicago-Naperville, Ill., and Ind.-Elgin, Wis. (1:928); Orlando-Kissimmee-Sanford, Fla. (1:954); Cleveland-Elyria, Ohio (1:1,029); Cincinnati (1:1,070) and New York-Newark-Jersey City, N.J. (1:1,149).
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