Insufficient and Negative Equity

Transcription

1 Insufficient and Negative Equity Lack Of Equity Impedes The Real Estate Market Mark Fleming Chief Economist December, 2011

2 70% 60% 50% 40% 30% Negative Equity Highly Concentrated Negative Equity Share, Q million households Nearly $700 billion dollars of mortgage debt Top 5 states account for 5.5 million households, $329 billion dollars US Average 22% 20% 10% 0% Nevada Arizona Florida Michigan Georgia California Virginia Ohio Maryland Colorado Idaho Illinois Utah Rhode Island New Hampshire Washington Oregon South Carolina Tennessee Minnesota Missouri New Jersey Wisconsin Massachusetts Delaware North Carolina Washington, DC New Mexico Alabama Connecticut Nebraska Arkansas Indiana Kansas Texas Iowa Hawaii Kentucky Alaska Oklahoma Montana Pennsylvania North Dakota New York Negative Equity Share Near Negative Equity Share

3 100% Twenty two Million Households Have Insufficient Equity Distribution of Home Equity, Q % 80% 70% 60% 50% 40% 30% 20% 10% 0% NV AZ FL MI GA CA MS MD VA OH ID US IL RI CO UT NH WA OR MN NJ MO MA SC TN LA WI DE DC NM CT WY NC AL IN NE HI KS AR TX IA KY MT ME PA AK OK ND NY WV Less than 80% 80%-100% 100%+

4 40.0% Leverage and Property Type are Differentiating Characteristics Negative Equity Share by Loan Characteristic, Q % 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 1st Only 1st and Junior Purchase Refi SFR Condo Owner Investor

5 Typically Negative Equity Loan is No Junior, SFR, Refinance, Owner Occupied Number of Negative Equity Loans, Q ,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000-1st Only 1st and Junior Purchase Refi SFR Condo Owner Investor

6 Majority of Negative Equity Dollars in SFR, Refinance, Owner Occupied Aggregate Dollar Value of Negative Equity, Q Billions st Only 1st and Junior Purchase Refi SFR Condo Owner Investor

7 Existence of Junior Liens Significantly Increases Negative Equity Average CLTV By Price Tier and Leverage Type, Q % 140% 120% 100% 80% 60% 40% 20% 0% 0 to $100k $100k to $200k $200k to $300k $300k to $400k $400k to $500k $500k to $600k $600k to $700k $700k to $800k $800k to $900k $900k to $1M $1M+ 1st Only LTV 1st and Junior LTV

8 6.00 Nine Million Negative Equity Households In 100K-400K Price Range Number of Negative Equity Households by Price Tier, Q Millions to $100k $100k to $200k $200k to $300k $300k to $400k $400k to $500k $500k to $600k $600k to $700k $700k to $800k $800k to $900k to $900k $1M $1M+

9 Depth of Price Declines Eventually Caught Up With Non-Leveraged Number of Negative Equity Households by Leverage Type, Q ,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 - Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q st and Junior 1st Only

10 Negative Equity Risk Has Shifted to Owner Occupied Households Number of Negative Equity Households By Occupancy Status, Q ,000,000 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 - Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Investor Occupied Owner Occupied

11 Negative Equity Severely Restricts Refinancing Opportunities Percent of Loans with Rates Above 5%, Q % 80% Positive Equity Negative Equity 75% 70% 65% 60% 55% 50% 45% 40% Current Combined LTV Segment

12 Negative Equity Reduces Good Sales Non-distressed sales volumes are lower for deeply indebted markets Source: CoreLogic Q2 2011

13 Negative Equity Projection When Marker Increases Past Zero = Positive Equity, Q Projection $100,000 $50,000 $- $(50,000) $(100,000) $(150,000) Atlanta-Sandy Springs-Marietta GA Boston-Quincy MA Cape Coral-Fort Myers FL Dallas-Plano-Irving TX Detroit-Livonia-Dearborn MI Lancaster PA Las Vegas-Paradise NV Pittsburgh PA Washington-Arlington-Alexandria DC Riverside-San Bernardino-Ontario CA

14 Will Prices Ever Grow Again? House Price Appreciation Expected to Turn Positive in 2013 HPA 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% Source: CoreLogic, Sept 2011 SFC YOY SFCXD YOY

15 Depth and Duration of Housing Recessions Significant current and past state level housing recessions Cumulative Price Movement Since Inception of Price Decline Time in Years US Current CA Early 1990s LA Mid 1980s MA early 1990s TX Mid 1980s NV Current CA Current Source: CoreLogic, September 2011