Posted on 02/26/2010 3:02:40 PM PST by xzins
One Quarter of Mortgage Holders Sink Underwater
By Steve Cook Real Estate Economy Watch
ArticlePhotosListen.Share More than 11.3 million, or 24 percent, of all residential properties with mortgages, were in negative equity at the end of the fourth quarter of 2009, up from 10.7 million and 23 percent at the end of the third quarter of 2009.
An additional 2.3 million mortgages were approaching negative equity at the end of last year, meaning they had less than five percent equity. Together, negative equity and near-negative equity mortgages accounted for nearly 29 percent of all residential properties with a mortgage nationwide, according to the latest report from First American CoreLogic.
Negative equity, or "underwater" or "upside down," means that borrowers owe more on their mortgage than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.
Negative equity continues to be concentrated in five states: Nevada, which had the highest percentage negative equity with 70 percent of all of its mortgaged properties underwater, followed by Arizona (51 percent), Florida (48 percent), Michigan (39 percent) and California (35 percent).
Among the top five states, the average negative equity share was 42 percent, compared to 15 percent for the remaining 45 states.
In numerical terms, California (2.4 million) and Florida (2.2 million) had the largest number of negative equity mortgages accounting for 4.6 million, or 41 percent, of all negative equity loans.
The net increase in the number of negative equity borrowers in Q4 2009 was 620,000, with the largest percentage increases occurring in Nevada, Georgia and Arizona. Among the states with the highest negative equity shares, California had the smallest increase in the negative equity share, which only rose 0.4 percent to 35.1 percent. In numerical terms, Florida had the largest increase in the number of negative equity borrowers rising by more than 141,000, followed by Georgia (65,000) and Illinois (55,000).
The rise in negative equity is closely tied to increases in pre-foreclosure activity and is a major factor in changing homeowners' default behavior. Once negative equity exceeds 25 percent, or the mortgage balance is $70,000 higher than the current property values, owners begin to default with the same propensity as investors.
From Real Estate Economy Watch
Why should it matter if your home is worth less than what you are paying? Almost all cars are underwater after the first year.
It only matters to idiot flippers.
That means buying and/or speculating on inflated housing prices led to this debacle; and it is focused in very few areas.
The above is an unbelievable statistic.
Depends on the amount of negative equity.
If I owe 300,000 on a 100,000 house, then that’s awful.
Assuming an average mortgage of $250,000, that would be, what, $50 Trillion?
>>If I owe 300,000 on a 100,000 house, then that’s awful.<<
Not until you sell it. All you have is a POTENTIAL shortfall. In practical terms, the value of the home is irrelevant (except MAYBE for property tax, and then the lower amount helps).
California skews things by having ten percent of the entire United States population. Florida accounts for an almost equal number of underwater mortgages with only half the population.
BTW, I had the pleasure of watching some daytime TV today, and guess what I saw: a public service announcement aimed at black people, (I assume this was so, since all the actors were Black) touting our old friend, "The Community Reinvestment Act.
Obama is advertising for suckers to re-enact the whole disaster of the last ten years. W.T.F.
The devil’s in the details. Those that bought at the peak with no money down are going to be hurtin’ puppies real soon, if not already. And if they lose their job...
We’re not talkin about the couple grand you lose on a car.
The pattern that jumps up at me is that 4 of the 5 are very big illegal alien states. Michigan? Not so much, but a very big ACORN state.
Illegal aliens and ACORN would appear to be the correlating factors. Both have very poor people that sought to get into housing that they could not afford, by any means they could.
>>I generally agree with your implied sentiment but there will always be those who must sell their homes for various legitimate reasons, and will end up getting stuck with having to pay money in order to leave their home. <<
Those cases are not what the OP is measuring. They are saying that there are a lot of houses underwater across the board. My statement is “why is this bad in the larger picture?” If people choose to walk away from a promise they made due to a phantom number, then our problem is a moral one, not a fiscal one.
“Both have very poor people that sought to get into housing that they could not afford, by any means they could.”
Yes but CRA lawsuits by community organizers insured that no bank would turn down a loan or the govt would be all over them.
Agreed. Another thing that jumps out at me, and these states are the same states that caused the mortgage mess in the first place, is that the entire nation has been taken under by the practices of just a few states. I’ll give you that Calif, Fla, & MI are large states, but they are about a quarter of the population.
I have a daughter in Fla (West Palm area) who was wanting to buy this particular house during the huge bubble, about a year before the fall. She told me the price of the house and the square footage and how everything was going upupup, the sky’s the limit.
I said that’s crazy for that footage; don’t do it. She didn’t and it’s now priced only 2/3rds of that point, and she’s waiting for more drop. And it sounds like it will drop whether the builder walks on the (construction?) loan or not.
Because according to my extremely liberal stylist, she bought a home to get ahead and create a little nest egg. She did not buy it to pay twice as much as the house across the street which is identical and never see a return for years. Like why would she do that she exclaimed!
So home to mommie to live and let her house go into foreclosure. In her mind she should not be held responsible because it is not fair. She is sure because everyone else is doing it her credit won’t be hit too hard and she can continue her multiple vacations.
Interesting when her home doubled in equity within 2 years it was the greatest thing since sliced bread however.
Not to worry, obama is going to forbid foreclosures until his people get a chance to look at each one and see how he can spend some more tax dollars on the irresponsible.
Like, how does a 5 million dollar home get a loan modification when they owe less than 2 million? Because Obama wants to keep people in their homes I was told.
How does that same person get loan mods on their rentals that are rented?
It only matters to idiot flippers.
Consider those of us who had to take a job in another state, because it was the only one I could find in six months of looking, and we can't sell our house so I have to live in a different state than my wife and four kids.
Do you think it might matter to me?
Not really
How many people have to sell their houses to retire or to move elsewhere due to the job market or for other quality of life reasons?
Even people who put 20% down and made payments over the past 5-7 years (average time people keep a house)- are doomed to huge financial losses
Harry Dent predicted housing prices down to 1990 values - a huge amount of the market has bought houses after 1990
Then, there are the losses in long term retirement and kid college accounts, mutual funds and stock portfolios.
This is not people to scoff at as deadbeats or speculators, this is reaching a lot of average hard working people who have a hard time staying put and riding this out for another decade or more
“It only matters to idiot flippers.”
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As opposed to flippant idiots like yourself?
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