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Thursday, August 26, 2010

CoreLogic: 11 Million U.S. Properties with Negative Equity in Q2

by Calculated Risk on 8/26/2010 03:32:00 PM

Note that the slight decline in homeowners with negative equity was mostly due to foreclosures.

First American CoreLogic released the Q2 2010 negative equity report today.

CoreLogic reports that 11 million, or 23 percent, of all residential properties with mortgages were in negative equity at the end of the second quarter of 2010, down from 11.2 million and 24 percent from the first quarter of 2010. Foreclosures, rather than meaningful price appreciation, were the primary driver in the change in negative equity. An additional 2.4 million borrowers had less than five percent equity. Together, negative equity and near negative equity mortgages accounted for nearly 28 percent of all residential properties with a mortgage nationwide.
"Negative equity continues to both drive foreclosures and impede the housing market recovery. With nearly 5 million borrowers currently in severe negative equity, defaults will remain at a high level for an extended period of time," said Mark Fleming, chief economist with CoreLogic.
From the report:
  • Negative equity remains concentrated in five states: Nevada, which had the highest percentage negative equity with 68 percent of all of its mortgaged properties underwater, followed by Arizona (50 percent), Florida (46 percent), Michigan (38 percent) and California (33 percent).

  • The declines were primarily due to foreclosures, not the stabilization or small increases in prices in some markets. The largest decrease in negative equity occurred among those with loan-to-value (LTV) ratios in excess of 125 percent, where the number of negative equity borrowers fell to 4.8 million, down from 5 million last quarter.
  • 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 with mortgages in 33 states and the D.C. have negative equity.

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

    CoreLogic also released a negative equity report for 164 metro areas (excel file) (with a minimum of 50,000 mortgages). Las Vegas is at the top with 72.8% of homeowners with mortgages in negative equity (another 3.3% are close) - and the top of the list is dominated by Nevada, California, Arizona and Florida - but it is amazing how widespread the problem is!

    Even with foreclosures reducing the number of negative equity mortgages, I expect the number of homeowners with negative equity will increase as prices fall later this year.