Homeowner Equity is on the Rise

With home prices inching up, more Americans are emerging from being underwater (owing more on their mortgage than their home is currently worth).

Several reports have tried to estimate how many homeowners came out from being underwater last year. CoreLogic reported that about 1.4 million borrowers moved above water for the first nine months of 2012. Zillow recently estimated that 2 million homeowners emerged last year. And J.P. Morgan Securities reported that the number of underwater homeowners fell from 11 million to 7 million in 2012.

“Estimates can vary for a number of reasons,” The Wall Street Journal reports. “Underwater borrowers can move back to positive equity by paying down their loan principal or by seeing prices rise. Properties can also ‘exit’ negative equity when they go through foreclosure or when the bank approves a short sale. In those cases, borrowers aren’t being returned to positive equity – instead, they simply cease to be borrowers.”

Many of the largest home gains across the country came in areas that had a high number of underwater borrowers.

“If this correlation persists in the coming years, the underwater problem could fade much faster than implied by the speed of national house prices appreciation,” Goldman Sachs researchers told The Wall Street Journal.



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