Even in the worst-hit markets, home equity is being restored. Just 8.5 percent of properties had so-called negative equity in the fourth quarter, with debt exceeding their value, according to a report Thursday by consumer analytics firm CoreLogic Inc.
The number of homeowners with at least 20 percent equity is “rising rapidly,” Anand Nallathambi, president and chief executive officer of CoreLogic, said in a statement. “In 2016, we expect home equity levels to continue to build.”
For all the gains, the recovery in home equity has been uneven and narrower than in the 2002-2006 housing boom, said William Emmons, senior economic adviser at the St Louis Fed’s Center for Household Financial Stability.
“The wealth from housing has shifted from a broad swath to more concentration among families who are older, better educated, higher income, white and increasingly Asian, and who live more along the coastal areas,” Emmons said.
Gains have been less than complete in some of the cities that were at the center of the housing bubble.
In Las Vegas, housing prices are 38 percent below the level reached in April 2006, according to the Case-Shiller index. Homes in Miami, Tampa and Phoenix are all fetching at least 25 percent less than they did at their peaks. Even so, property values in Las Vegas have recovered 61 percent from their low.
“We don’t want to return to peak -- that was craziness here,” said Stephen Miller, economist at the University of Nevada, Las Vegas. “The housing price recovery has been nice. What we have is a goldilocks -- not too much, not too little.”
“Underwater” homeowners are still an isolated concern. In Nevada, almost one-fifth of properties were upside down, followed by Florida, Illinois and Arizona. Among 10 large metro areas, Miami had the largest share of properties with negative equity -- about 22 percent in the fourth quarter, according to CoreLogic.
“People are living with it, and waiting for things to get better,” said Michael Orr, real estate professor at Arizona State University in Tempe. “The market is back to stable. It was the peak that was abnormal.”
Greg Zorn, a real estate investor in Naples, Florida, bought a two-bedroom duplex in 2006 for $310,000 and has rented the property for a decade. Ten years ago, Naples was ranked by IHS Global Insight economists as the most overvalued housing market in the nation, after prices surged 140 percent from 2001.