Share of Seriously Underwater Foreclosure Properties Drops to New Low

underwater_foreclosure_propertyRecently the Q2 2015 U.S. Home Equity & Underwater Report was released, which shows that as of the end of the second quarter there were 7,443,580 U.S. residential properties that were seriously underwater—where the combined loan amount secured by the property is at least 25 percent higher than the property’s estimated market value—representing 13.3 percent of all properties with a mortgage.

The second quarter underwater numbers were up from 7,341,922 seriously underwater homes representing 13.2 percent of all homes with a mortgage in the previous quarter—making Q2 the second consecutive quarter with a slight increase in both the number and share of seriously underwater properties—but were down from 9,074,449 seriously underwater properties representing 17.2 percent of all homes with a mortgage in the second quarter of 2015. The number and share of seriously underwater homes peaked in the second quarter of 2012 at 12,824,729 seriously homes representing 28.6 percent of all homes with a mortgage.

Slowing home price appreciation in 2015 has resulted in the share of seriously underwater properties plateauing at about 13 percent of all properties with a mortgage. However, the share of homeowners with the double-whammy of seriously underwater properties that are also in foreclosure is continuing to decrease and is now at the lowest level we’ve seen since we began tracking that metric in the first quarter of 2012.

The share of distressed properties—those in some stage of the foreclosure process — that were seriously underwater at the end of the second quarter was 34.4 percent, down from 35.1 percent in the first quarter of 2015 and down from 43.6 percent in the second quarter of 2014 to the lowest level since tracking began in the first quarter of 2012. Conversely, the share of foreclosures with positive equity increased to 42.4 percent in the second quarter, up slightly from 42.1 percent in the first quarter and up from 34.1 percent in the second quarter of 2014.

Share of equity rich mortgaged properties up 1 million from year ago, down 300K YTD

The universe of equity-rich mortgaged properties—those with at least 50 percent equity—decreased on a quarter-over-quarter basis for the second straight quarter, down to 10.9 million representing 19.6 percent of all properties with a mortgage at the end of the second quarter. That was down from 11.1 million representing 19.8 percent at the end of the first quarter and down from 11.3 million representing 20.3 percent at the end of the fourth quarter, but still up from 9.9 million representing 18.9 percent at the end of the second quarter of 2014.

Although the number of equity rich homeowners with a mortgage has increased by 1 million compared to a year ago, that number dropped by nearly 300,000 between the end of 2014 and the middle of 2015. The number of homeowners with a mortgage who have at least 20 percent equity has dropped by more than 900,000 during the past six months, indicating that homeowners who have gained substantial equity thanks to the housing price recovery over the past three years are taking advantage of that newfound equity. Some are leveraging that equity into a higher LTV refinance or a move-up purchase, some may be downsizing into an all-cash purchase and some may be cashing out of homeownership altogether. Those homeowners cashing out of homeownership altogether would explain why the nation’s overall homeownership rate continued to decline in the second quarter even as homeownership rates among millennials increased.

Major metro areas with the highest percentage of equity rich properties reflect areas of continued growth in home prices: San Jose, California (43.8 percent), San Francisco, California (38.3 percent), Honolulu, Hawaii (36.7 percent), Los Angeles, California (32 percent), New York (30.7 percent), Pittsburgh, Pennsylvania (29.4 percent), Poughkeepsie, New York (28.0 percent), Oxnard, California (27.5 percent) and San Diego, California (26.9 percent).

Markets with the most seriously underwater properties

Markets with a population greater than 500,000 with the highest percentage of seriously underwater properties in Q2 2015 were Lakeland, Fla., (28.5 percent), Cleveland, Ohio (28.2 percent), Las Vegas, Nev. (27.9 percent), Akron, Ohio (27.3 percent), Orlando, Fla. (26.1 percent), Tampa, Fla. (24.8 percent), Chicago, Ill. (24.8 percent), Palm Bay, Fla. (24.4 percent) and Toledo, Ohio (24.3 percent).

Markets where the share of distressed properties—those in some stage of foreclosure—that were seriously underwater exceeded 50 percent in the first quarter of 2015 included Las Vegas, Nev. (57.7 percent), Lakeland, Fla. (54.8 percent), Cleveland, Ohio (52.9 percent), Chicago, Ill. (52.5 percent), Tampa, Fla. (51.7 percent ), Palm Bay, Fla. (51.5 percent), and Orlando, Fla. (51.2 percent).

Markets with the highest share of positive equity foreclosures

Those states with the highest percent of distressed properties with positive equity included Colorado (72.0 percent), Alaska (69.8 percent), Texas (66.4 percent), Oklahoma (65.2 percent), and Nebraska (64.4 percent).

Major markets where the share of distressed properties with positive equity exceeded 60 percent included Denver, Colo. (83.7 percent), Austin, Texas (83.1percent), Honolulu, Hawaii (77.5 percent), San Jose, Calif. (77 percent), Pittsburgh, Pa. (75.9 percent), Jackson Miss. (75 percent), Nashville, Tenn. (69.3 percent) and Houston, Texas (69 percent).

Homes owned seven to 11 years account for 38 percent of all seriously underwater homes

Residential properties owned between seven years and 11 years accounted for 38 percent of all seriously underwater homes as of the end of the second quarter. The highest seriously underwater rate is for homes owned for nine years, 21.6 percent of which are seriously underwater, followed by those owned for 10 years, 19.8 percent of which are seriously underwater, and those owned for eight years, 19.0 percent of which are seriously underwater.

White House Makes Solar Power Accessible To Lower-Income Households

Solar panel installationIn an effort to “scale up” solar, the Obama Administration recently announced an initiative that will result in lower household energy bills and job growth in the clean energy sector. The initiative, unveiled by the White House earlier this week, will primarily benefit renters and low- and moderate-income communities.

Centered on the launch of a national partnership, the initiative is backed by more than $520 million in independent commitments and a 260-plus project commitment by housing authorities and other organizations in more than 20 states.

The initiative addresses homeowner cost concerns in part through action by the Federal Housing Administration (FHA), which will ease access to funds up to $25,000 for energy-efficient improvements, including solar upgrades. To achieve this, the FHA has already clarified its first mortgage policy, and will restructure its second mortgage program so that homeowners may choose how to remit funds to contractors, and make contributions to lower interest rates or cut out-of-pocket costs. FHA underwriting standards will also become more flexible.

Additionally, the initiative seeks to outfit federally subsidized housing with renewable energy, installing 300 megawatts of solar (and other types of renewable energy) by 2020. To accomplish this goal, the Department of Housing and Urban Development (HUD) will provide technical assistance to affordable housing organizations through a new website, and will release a toolkit outlining steps to secure Section 108 Community Development Block Grant funds for energy-efficient projects.

States will also have access to a guide provided by the Department of Energy (DOE) and the National Renewable Energy Lab with information on developing community solar programs and implementing shared solar policies.

On the jobs front, the Obama Administration expects to prepare over 75,000 Americans (including military personnel) to enter the solar industry by 2020. Steps to realize this goal include a joint venture with AmeriCorps to help low-income individuals secure employment, and an eight-part webinar series hosted by the DOE.

As of 2014, over 500,000 homes across the country have solar installations. Their value is not lost on homebuyers, who, according to a recent DOE report, are willing to pay more for both new and existing solar-powered properties.

To learn more about the initiative, click here.

HUD Announcing Final Rule On Affirmatively Furthering Fair Housing

fair_housingThe U.S. Department of Housing and Urban Development (HUD) recently announced a final rule to equip communities that receive HUD funding with data and tools to help them meet long-standing fair housing obligations in their use of HUD funds. HUD will also provide additional guidance and technical assistance to facilitate local decision-making on fair housing priorities and goals for affordable housing and community development.

For more than 40 years, HUD funding recipients have been obligated by law to reduce barriers to fair housing, so everyone can access affordable, quality housing. Established in the Fair Housing Act of 1968, the law directs HUD and its program participants to promote fair housing and equal opportunity. This obligation was intended to ensure that every person in America has the right to fair housing, regardless of their race, color, national origin, religion, sex, disability or familial status. The final rule aims to provide all HUD program participants with clear guidelines and data they can use to achieve those goals.

“As a former mayor, I know firsthand that strong communities are vital to the well-being and prosperity of families,” says HUD Secretary Julián Castro. “Unfortunately, too many Americans find their dreams limited by where they come from, and a ZIP code should never determine a child’s future. This important step will give local leaders the tools they need to provide all Americans with access to safe, affordable housing in communities that are rich with opportunity.”

HUD’s final rule responds to the recommendations of a 2010 Government Accountability Office report as well as stakeholders and HUD program participants who asked for clearer guidance, more technical assistance, better compliance and more meaningful outcomes. HUD considered and incorporated feedback from the significant public input and comments that it received during the development of this final rule. For example, in response to public feedback, HUD will phase in implementation of the rule so that grantees have substantial time to transition to the new approach. By encouraging a balanced approach that includes targeted investments in revitalizing areas, as well as increased housing choice in areas of opportunity, the rule will enable program participants to promote access to community assets such as quality education, employment, and transportation.

HUD’s rule clarifies and simplifies existing fair housing obligations and creates a streamlined Assessment of Fair Housing planning process, which will help communities analyze challenges to fair housing choice and establish their own goals and priorities to address the fair housing barriers in their community. While the final rule will take effect 30 days after publication, it will not be fully implemented immediately. HUD will provide support to program participants that need to complete an Assessment of Fair Housing to ensure they understand the process and to identify best practices across a diverse group of communities.

To learn more about the Affirmatively Furthering Fair Housing Final Rule, visit www.hud.gov/AFFH.