Rising home prices are returning more homes to a positive equity position, according to Realty Trac.
At the peak in May 2012, 12.8 million properties, 29%, were seriously under water. In September 2013 these properties were down to 10.7 million, 23%, and down to 9.3 million or 19% in December.
Homeowners who retained equity during the period of plummeting prices and rising foreclosures are benefiting as well from rising prices, watching their equity grow. The universe of equity rich properties, defined as 50% or more, grew during the 4th quarter from 7.4 million representing 16% of all residential properties with a mortgage in September, to 9.1 million, or 18% in December.
During the housing downturn we saw a downward spiral of falling home prices resulting in rising negative equity, which in turn put millions of homeowners at higher risk for foreclosure when they encounter a trigger, such as job loss. Now rising home prices have given these homeowners a lifeline against foreclosure. At the other end, the percentage of equity rich homeowners is reaching a tipping point that should result in a larger inventory of homes listed for sale and give the economy a nice shot in the arm in 2014.
Unfortunately Illinois remains third in highest percentage of seriously underwater properties, 32%. Hopefully rising home prices along with loan modification, helps many of these homeowners avoid foreclosure. A brighter outlook for 2014 would be refreshing.