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Monday, December 13, 2010

CoreLogic: 10.8 Million U.S. Properties with Negative Equity in Q3

by Calculated Risk on 12/13/2010 09:00:00 AM

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

First American CoreLogic released the Q3 2010 negative equity report today.

CoreLogic reports that 10.8 million, or 22.5 percent, of all residential properties with mortgages were in negative equity at the end of the third quarter of 2010, down from 11.0 million and 23 percent in the second quarter. This is due primarily to foreclosures of severely negative equity properties rather than an increase in home values.

During this year the number of borrowers in negative equity has declined by over 500,000 borrowers. An additional 2.4 million borrowers had less than five percent equity in the third quarter. Together, negative equity and near-negative equity mortgages accounted for 27.5 percent of all residential properties with a mortgage nationwide.
"Negative equity is a primary factor holding back the housing market and broader economy. The good news is that negative equity is slowly declining, but the bad news is that price declines are accelerating, which may put a stop to or reverse the recent improvement in negative equity," said Mark Fleming, chief economist with CoreLogic.
Here are a couple of graphs from the report:

CoreLogic Distribution Negative EquityClick on graph for larger image in graph gallery.

This graph shows the distribution of negative equity (and near negative equity). The more negative equity, the more at risk the homeowner is to losing their home.

About 10% of homeowners with mortgages have more than 25% negative equity - although the percent of homeowners with severe negative equity has been declining over the last few quarters mostly because of homes lost to foreclosure.

CoreLogic, Equity by StateThe second graph shows the break down of equity by state.

In Nevada very few homeowners with mortgages have any equity, whereas in New York almost half have over 50%.

As Mark Fleming noted, the number of homeowners with negative might increase over the next few quarters with declining home prices.