Tuesday, September 10, 2013

Lawler: Consistent with Other US Housing Reports, Negative Equity Estimates Vary Widely!

CR Note: This is from housing economist Tom Lawler. Lawler has been pointing out the inconsistency in US housing data; this time on negative equity.

CoreLogic released its “Equity Report” for the second quarter of 2013, in which the company estimates the distribution of equity (home value less mortgage balance) across all U.S. single-family residential properties with a mortgage. ...

Given that this report is based on US housing data, it just “wouldn’t be right” if there weren’t other reports that show significantly different “negative equity” estimates. Zillow and RealtyTrac, e.g., have negative equity reports for the second quarter, and LPS Analytics released its own estimate for the number of residential properties in a negative equity position in March, 2013 (14.7%, compared to CoreLogic’s Q1 estimate of 19.7%). Below is a table showing different estimates.

RealtyTrac’s report has three categories: “deeply underwater” (LTV >=125%); “resurfacing equity” (LTV 90% to 110%); and “equity rich” (LTV 50% or lower). RT said that its “estimates” were as of the beginning of September, but I have no clue how it derived home values as of the beginning of September.

There are two main sources of differences in negative equity estimates: the first, of course, is the value of the underlying property. The second is the current mortgage balance (including first and junior liens) on each underlying property. In many cases the only public data available are the original mortgage balances of closed-end first and second liens, and for HELOCs the total line of credit (as opposed to utilization). CoreLogic adjusts public record data on mortgages for amortization and home equity utilization to get a “true” (read "estimated”) level of the mortgage balance for each property. Zillow says that it has “partnered” with TransUnion to get “actual” current outstanding mortgage balances.  I’m fairly certain RealtyTrac doesn’t make any such adjustment, and its estimate that 23.7% of homes with mortgages are “deeply underwater” is almost certainly [incorrect].

Homes w/Mortgages (millions and percent), Latest Negative Equity Report
 CoreLogic
(6/30/13)
Zillow
(6/30/13)
RealtyTrac
(9/1/13)
LPS
(3/31/13)
Homes w/ Mortgage48.651.446.550.0
Negative Equity7.112.2 7.3
Negative Equity >25%2.8 10.7 
Negative Equity >20% 7.0  
Negative Equity (%)14.6%23.8% 14.7%
Negative Equity >25% (%)5.8% 23.0% 
Negative Equity >20% (%) 13.6%  

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