Over $1 trillion in equity was earned by one million homeowners over the year ending in June 2014. With that gain, roughly 44 million of the 49 million homes with mortgages have positive equity leaving just 10% underwater. The number of underwater homes is down from 12% in the first quarter of 2014 and down from 15% one year ago.opens IMAGE file
“Under-equitied” homes are down as well. Those homes, where the owners have less than 20% equity, made up just 19% of homes with mortgages. These homes are traditionally difficult to sell or refinance because a small swing in home prices could drop them into negative equity. In fact, just over one million homes are considered to be near-negative equity because a price swing of five percent or less could send them into negative equity.
The overall increase in equity was viewed positively by most analysts. A primary residence makes up a huge portion of most homeowners’ investment portfolio, and an increase in home values is a sign of increasing wealth for a broad portion of the economy. Home sales are also expected to increase because the increase in equity allows homeowners to sell their current home at a profit in order to upgrade without fear of not being approved for a new mortgage because they were underwater. Increasing prices may also restore confidence in many potential homeowners who were afraid to enter the market during years of falling prices.
Some states fared better than others — Texas, Alaska, Montana, North Dakota, and Hawaii had the largest proportion of homeowners with positive equity. However, the remaining states are likely close behind in the economic recovery.