Real Estate News & Commentary

Where Do Mortgages Remain Underwater?

62 Articles Written
Underwater Mortgages

One of the most positive symptoms of the housing recovery has been the marked decrease in underwater mortgages. With buyer activity accelerating since 2012, and home prices rising as a result, many homeowners faced with toxic equity gradually saw their troubled property holdings submerged. This has left a range of Americans with the space to sell or refinance their property, which has gone a respectable distance to further stabilize the U.S. housing market.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

That being said, certain metro regions remain troubled by elevated levels of underwater mortgage. According to a recently published USA Today report, a small constellation of populous cities lag behind the national recovery in terms of the proportion of threatened mortgages. The USA Today story outlines that the national rate of underwater mortgage was 23.8% at the close of Q2, and that particular American are sustaining underwater mortgage volumes notably over 50% the national average.

Certain metros will come as no surprise. Notoriously troubled Detroit has a standing rate of underwater mortgage which tallies at 37.0%, among the highest in the nation for any major city. There appears to be a trend of elevated toxic real estate equity throughout Florida and the Deep South. Atlanta has an underwater mortgage rate of a full 44.4%, the second highest in the nation. The USA Today report also notes that Florida’s three largest metro regions have uneasily high rates of underwater mortgage as well. The Miami-Fort Lauderdale region has an underwater mortgage rate of 34.1%, while the Tampa and Orlando areas have rates of 36.6% and 39.8% respectively.

The American Southwest also lags behind the national average in terms of the amount of homeowners burdened with underwater mortgages. Nearly half of Las Vegas’ homeowners are struggling with some form of negative equity, as 48.4% of all homeowners are handling underwater loans. Nearby Phoenix and Riverside, CA are facing 31.3% and 36.1% underwater mortgage rates, an unfortunate trend considering how impactful their lagging housing markets have been in hindering overall economic recovery.

So What’s the Positive?

For all the discussion around particularly troubled metros, certain American cities are performing with exceptional strength. Pittsburgh, long burdened by its reputation as a faded steel town, has made an exceptional economic recovery and with it sustained healthy negative equity rates. The city itself has an underwater mortgage rate nearly half the national average, with only 12.8% of all residents handling negative equity as of the close of Q2 2013. The greater Midwest also seems to be recovering more or less in step with the national average, a testimony to the stable employment rates throughout the region. Cleveland, Columbus, St. Louis, and Cincinnati all had negative homeowner equity rates barely above the national average. This is particularly heartening news considering the national average is heavily influenced by the exceptionally lean negative equity rates found throughout cities in the Northeast and West Coast.

Ultimately, these figures speak to the importance of sustained job growth and healthy employment rates in fostering localized housing recoveries. The migration of new business, as well as an active workforce, goes hand-in-hand with an appreciation in property values. Once a city becomes competitive for business, purchase rates typically escalate, and with that come a localized rise in home values. This phenomenon can be easily observed in the Dallas/Fort Worth area, where the 16.5% negative equity rate can likely be attributed to its business-hospitable climate and standout employment rate.

Photo: yewenyi

    Rich Cowdery
    Replied over 6 years ago
    Great story. At least we are getting better.
    Rich Cowdery
    Replied over 6 years ago
    Great story. At least we are getting better. Reply Report comment
    Karen Rittenhouse
    Replied over 6 years ago
    I’d just like to point out that these numbers relate to those who have mortgages. The great news is that more than one third of all homes in the US have no mortgage, are owned free and clear. The areas you mention come as no surprise. These cities that have struggled the most continue to struggle. Such a shame. Thanks for keeping us updated, Harrison.