Rising home prices pulled more Southland homeowners back above water on their mortgages at the start of the year, according to new data out Thursday.
Just 8% of mortgage holders in the Los Angeles metro area, and 17% of those in the Inland Empire, owed more on their homes than the homes were worth in the first quarter, according to figures from Irvine-based data firm CoreLogic.
Both figures are an improvement from the fourth quarter of 2013 and sit at their lowest levels since CoreLogic started tracking underwater borrowers during the housing crash in 2009. Nationwide, 12.7% of home mortgages are underwater.
The surge in home prices, coupled with stricter lending standards and higher down-payment requirements, contributed to the improvement. That’s good news for homeowners and lenders since it dramatically reduces the likelihood of foreclosures.
It may also be good for the housing recovery, some experts say, because homeowners who have equity in their houses have a greater ability to sell and move to something bigger. These so-called “move-up” buyers have been a missing ingredient in the recovery, damping home sales in the middle tiers of the market. And the lack of their houses on the market is making it harder for first-time buyers to find a place.
But Sam Khater, deputy chief economist for CoreLogic, said he doesn’t quite see the housing market returning to full speed despite the improving equity picture. While more homeowners may have their heads above water these days, too many are still just barely atop the surface.
“Many borrowers still lack sufficient equity to move and purchase a home,” he said. “One in five borrowers have less than 10% equity in their property, which is not enough to cover the down payment and additional costs associated with a conventional mortgage.”