BiggerPockets

11.3 Million (25%) of all Mortgages are Underwater

Wednesday, February 24

Cnn.Money.com and several others are reporting that according to FirstAmerican CoreLogic more than 11.3 million homeowners, almost 25% of all U.S. mortgages, owe more on their mortgage than their home is now worth.  That is up from 23% and 10.7 million borrowers from three months earlier.  An equally critical number is that over 10% of all mortgagees owe 25% more than their home is worth.  "The rise in negative equity is closely tied to increases in pre-foreclosure activity," CoreLogic said. Once a homeowner owes 25% more than the house is worth, foreclosure rates rise sharply.
 
The number of underwater mortgages increased by about 620,000 from the third quarter, the firm said. Another 2.3 million mortgages had less than 5% equity in their home, which could be wiped out if home prices fall further.  "Negative equity is a significant drag on both the housing market and on economic growth," said Mark Fleming, chief economist with First American CoreLogic. "It is driving foreclosures and decreasing mobility for millions of homeowners."

Underwater mortgages are concentrated in few states.  In Nevada, 70% of mortgages were underwater followed by Arizona (51%), Florida (48%), Michigan (39%) and California (35%).

These numbers, along with close to 10% delinquency rates with payments over 60 days late for both FHA and Jumbo loans, point to a slow recovery.  It does however highlight likely upcoming opportunities for Short Sale and REO investors.
 

Comments

1. 

   James Ward Reply
   almost 2 years ago

   Very interesting. I did not realize the numbers were at those levels. I have mixed feelings about what will result from so many being underwater.

   Thanks for the info Ted.

2. 

   James Blakeley Reply
   almost 2 years ago

   Did you see the new Zillow report on Yahoo? http://finance.yahoo.com/real-estate/article/109131/americas-most-underwater-housing-markets
   Somehow a large part of the blame is on investor interest after all the real estate sales workshops. Small comments of speculation and predatory lending. Should I feel dirty? Cause I don't. I help owners sell when they can not get market prcing. I do not force anyone to sell. Terms are always negotiable. Praise us all or condemn us all by the actions of some.

3. 

   Ted Akers Reply
   almost 2 years ago

   Thanks for the post. Pretty good article - I am surprised more blame was not placed on speculators/investors. Phoenix was increasing at 20% + for several years - it had to adjust. Valuations are always a function of supply and demand. There is plenty of blame to go around - some bad mortgage product and a whole lot of lost jobs. Not dirty - I blame the no JOBS scenario first.

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