If you want to see the lingering effects of the financial crisis, then look no further than the number of Americans who are still underwater on their mortgages. According to a new report released this week by CoreLogic, a total of 7.1 million homeowners owed more on their mortgages than their homes were worth in the second quarter of this year. That equates to 14.5% of all mortgaged homes.
As you can see in the chart above, these figures represent a marked decline compared to the previous quarter. In the first three months of the year, CoreLogic estimated that 9.6 million, or 19.7%, of all residential properties with a mortgage, were encumbered by negative equity.
"Equity rebuilding continued in the second quarter as the share of underwater mortgaged homes fell to 14.5 percent," said CoreLogic's chief economist Mark Fleming. "In just the first half of the year, almost three and a half million homeowners have gained positive equity."
The trend is the result of rising home prices. As of June, we've had four consecutive months of double-digit, year-over-year gains in this regard. And, on a nationwide basis, home prices are now 15.7% higher than their low at the beginning of 2012.
According to CoreLogic, an additional 5% increase would translate into positive equity for 1.3 million homes.
This provides yet more evidence that the housing market is indeed in the process of recovering.
Over the last few quarters, in particular, we've seen momentum building among homebuilders. D.R. Horton (NYSE:DHI) recently announced that its new orders jumped by 12% on a year-over-year basis in the three months ended June 30. "Homes sold, closed and in backlog all increased double-digit percentages, while the dollar values all increased 30% or more," observed the chairman of the board Donald R. Horton.
And Toll Brothers (NYSE:TOL), the nation's largest luxury homebuilder, reported a similar jump of 26%. According to CEO Douglas Yearly, "We believe the recovery is real and we are in the early stages of the rebound."
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