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Report: ‘Underwater’ Home Equity Average is $70K
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More than a quarter of all U.S. residential properties were either in negative “underwater” equity, or very close to that point, as of September, according to an analysis by a real estate data firm.
The heaviest concentration of these homes is in states struggling with runaway foreclosure rates.
The average mortgage debt for properties in negative equity was $280,000. Borrowers were in a negative equity by an average of nearly $70,000.
The distribution of negative equity is heavily concentrated in five states: Nevada (65 percent), which had the highest percentage negative equity; Arizona (48 percent); Florida (45 percent); Michigan (37 percent); and California (35 percent).
Among the top five states, the average negative equity share was 40 percent, compared to 14 percent for the remaining states. Most of these homes were financed between 2005 and 2008, peaking in 2006 – where 40 percent of borrowers were in negative equity.
Nearly 10.7 million, or 23 percent, of all residential properties with mortgages were in negative equity, while an additional 2.3 million mortgages were approaching negative “underwater” status, meaning they had less than five percent equity, reported First American CoreLogic, a real-estate data provider based in Santa Ana, Calif.
Negative equity and near-negative equity mortgages totaled about 28 percent of all residential properties with a mortgage nationwide.
First American CoreLogic’s analyzed 47 million properties with a mortgage, which accounts for over 90 percent of all mortgages in the U.S. The firm changed its formula to the third quarter to ajudt for amortization and homeowner use of equity lines of credit. For that reason, the data provider said it’s current estimates cannot be compared to previous quarters.
Nonetheless, the figures confirm the pervasiveness of negative equity as unemployment continues to rise and the foreclosure crisis has yet to wane.
“The recent improvement in home prices this past spring and summer has slowed the increase in negative equity, but it will take a significant rebound in home prices, which we are not expecting, to offset the dampening effects of negative equity in the most depressed states,” said Mark Fleming, chief economist with First American CoreLogic.
Last week, the Mortgage Bankers Association said the U.S. mortgage delinquency rate reached a record 9.64 percent of all loans outstanding for the third quarter of this year.
That compares to 9.24 percent in the second quarter of 2009, and 6.99 percent in the third quarter of last year. The delinquency rate set a new record high last quarter. The records are based on MBA data dating back to 1972.
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The interesting thing about this article is that these were the states (CA, NV, FL, AZ) in which real estate prices soared due to rampant speculation and flipping. There were many examples where a house would be flipped in less than 2 weeks at a $15,000, $50,000 and more profit. The local people were caught up in the spiral and unfortunately are left to the consequences of home prices returning to norm. Chaulk up another one for the excesses of our cherished capitalism. However, my guess is that many of the houses under water belong to these speculators, and I don’t feel too sorry for them.
A friend of mine here in Florida was one of the speculators. He bought 7 houses in 2006-2007. Needless to say he is tens of thousands underwater on each house. I feel sorry for the guy, but I warned him. Even for those of us who bought right, it’s still hard to find good tenants.
Too bad for those who invested in the past and now are suffering in underwater. This is one of the worse effects of the crisis