Monday, May 10, 2010

Report: 11.2 Million U.S. Properties with Negative Equity in Q1

by Bill McBride on 5/10/2010 11:23:00 AM

First American CoreLogic released the Q1 2010 negative equity report today.

CoreLogic reported today that more than 11.2 million, or 24 percent, of all residential properties with mortgages, were in negative equity at the end of the f irst quarter of 2010, down slightly from 11.3 million and 24 percent from the fourth quarter of 2009. An additional 2.3 million borrowers had less than five percent equity. Together, negative equity and near-negative equity mortgages accounted for over 28 percent of all residential properties with a mortgage nationwide.
From the report:
  • 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 (34 percent). Las Vegas remains the top ranked CBSA with 75% of mortgaged properties being underwater, followed by Stockton (65%), Modesto (62%), Vallejo-Fairfield (60%) and Phoenix (58%). Phoenix had more than 550,000 underwater borrowers, the most households of any metropolitan market in the country. Riverside (463,000), Los Angeles (406,000) Atlanta (399,000) and Chicago (365,000) round out the top five markets.
  • Negative Equity by State Click on image for larger graph in new window.

    This graph shows the negative equity and near negative equity by state.

    Although the five states mentioned above have the largest percentage of homeowners underwater, 10 percent or more of homeowners have negative equity in 33 states and the D.C., and over 20% have negative equity or near negative equity in 23 states and D.C. This is a widespread problem.

    Note: Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming are NA on the graph above.

    Severity of Negative Equity The second graph shows the distribution of homeowners with a mortgage with near or negative equity.
    The share of borrowers whose mortgage debt exceeds the property value by 25% or more fell slightly to 10.4% or 4.9 million borrowers, down from 10.6% or 5 million borrowers. The aggregate dollar value of negative equity for these deeply underwater borrowers was $656 billion dollars.
    Research has shown that once negative equity exceeds 25 percent "owners begin to default with the same propensity as investors", and it is these 4.9 million borrowers - with $656 billion in debt - that are most at risk for foreclosure.

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