In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Tuesday, March 08, 2011

CoreLogic: 11.1 Million U.S. Properties with Negative Equity in Q4

by Calculated Risk on 3/08/2011 10:11:00 AM

CoreLogic released the Q4 2010 negative equity report today.

CoreLogic ... today released negative equity data showing that 11.1 million, or 23.1 percent, of all residential properties with a mortgage were in negative equity at the end of the fourth quarter of 2010, up from 10.8 million, or 22.5 percent, in the third quarter. The small increase reflects the price declines that occurred during the fourth quarter and led to lower values. An additional 2.4 million borrowers had less than five percent equity, referred to as near-negative equity, in the fourth quarter. Together, negative equity and near-negative equity mortgages accounted for 27.9 percent of all residential properties with a mortgage nationwide....

The consensus is that home prices will fall another 5 percent to 10 percent in 2011. If so, the most that negative equity will rise is another 10 percentage points, all else equal. What’s important is not just the share of at-risk loans (i.e., loans with less than 10 percent equity) but current price movements.
The aggregate level of negative equity increased to $751 billion in Q4, up from $744 billion last quarter but still below $800 billion a year ago. Over $450 billion of the aggregate negative equity dollars include borrowers who are upside down by more than 50 percent.
"Negative equity holds millions of borrowers captive in their homes, unable to move or sell their properties. Until the high level of negative equity begins to recede, the housing and mortgage finance markets will remain very sluggish," 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.

CoreLogic, Negative Equity by SegmentThe second graph from CoreLogic shows the aggregate dollar volume by percent of negative equity. Of the $751 billion in negative equity in Q4, over $450 billion of the aggregate negative equity dollars are for borrowers who are upside down by more than 50%. Just under $200 billion more is for borrowers who have 25% to 50% negative equity.

All of these borrowers are at high risk for foreclosure.

CoreLogic, Negative Equity by StateThe third graph shows the break down of equity by state. Note: Data not available for Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming.

In Nevada, over 65% of homeowners with mortgages owe more than their homes are worth. Arizona and Florida are around 50%. Michigan, Georgia and California are all over 30%.