Some positive news for Twin Cities homeowners: The number of those with negative equity continues to fall.
At the end of last year, 10 percent of all people with a mortgage in the region owed more than their house is worth. That’s down from 16 percent in 2012, according to a new report from research firm CoreLogic.
“This is good news for individuals, households, communities and the market,” said Julie Gugin, executive director of the Minnesota Homeownership Center, which tracks foreclosure activity across the state and provides support to people who are living on the financial edge.
Gugin said there’s a close correlation between home equity and the ability of a family to avoid foreclosure.
“This just leads to more stability in individual households; folks are more likely to stay in their homes,” Gugin said. She added that it’s also good for people who have been waiting to sell their homes.
Statewide last year there were 11,834 foreclosures, a 34 percent decline from 2012 and the fewest number of sheriff’s sales since 2005, according to the Minnesota Homeownership Center. Negative equity happens when house prices decline and/or when mortgage debt increases. Nationwide, nearly 6.5 million homes, or 13.3 percent of all residential properties with a mortgage, were still in negative equity territory at the end of last year.
Sam Khater, CoreLogic’s deputy chief economist, said negative equity in Minneapolis was well below many other Midwestern markets such as Detroit (25 percent), Chicago (22 percent) and Cleveland (24 percent) because of improvements in home prices.
“While still above the normal rate of 3 to 4 percent, the negative equity share in Minneapolis is less than half the level at the end of 2011, when it was 22 percent,” Khater said.
Nevada had the highest share of mortgages that were underwater, another term for negative equity, followed by Florida and Arizona. Texas, Maine, North Dakota and Montana had the lowest share.
Mark Fleming, CoreLogic’s chief economist, said negative equity peaked in December 2009, when more than 12 million mortgaged homeowners were underwater.
“Over the past four years, more than 5.5 million homeowners have regained equity,” reducing their risk of foreclosure and unlocking pent-up supply in the housing market, Fleming said.