CoreLogic reported that more than 24 percent, or 11.2 million, of all residential properties with mortgages were in negative equity at the end of the first quarter of 2010. These data findings are slightly down from the last quarter in 2009, at 11.3 million. Additionally, 2.3 million borrowers had less than five percent equity, meaning that, nationwide, negative and near-negative equity mortgages accounted for over 28 percent of all residential properties with a mortgage.
Five states had the highest concentrations of negative equity. Nevada was at the top with 70 percent of all its mortgaged properties in negative standings. Arizona was second at 51 percent, then Florida at 48 percent, followed by Michigan at 39 percent, and California at 34 percent. Phoenix, with over 550,000 negative mortgage borrowers, has the most households of any metropolitan market in the country that are “underwater.” Riverside followed at 463,000, then Los Angeles with 406,000, Atlanta at 399,000, and Chicago with 365,000.
The amassed dollar value of negative equity for those upside-down in their mortgages was $656 billion. Borrowers whose mortgage debt exceeds their property value by 25 percent or more was at 4.9 million or 10.4 percent, falling slightly from 10.6 percent or 5 million borrowers last quarter.
“The two most important triggers of default, negative equity, and unemployment, have stabilized over the last six months,” says Mark Fleming, chief economist with CoreLogic. “As house prices grow again and borrowers pay down their mortgage debt negative equity levels will begin to diminish. The typical underwater borrower is likely to regain their lost equity over the next five to seven years.”
The data also showed that the negative equity share for borrowers with junior liens, including closed end second liens and home equity lines of credit or HELOC, was 38 percent, much higher than those that did not have a junior lien at 19 percent. Borrowers without junior liens had a foreclosure rate of 2 percent, while those with a junior liens were doubled at 4 percent.
Written by Kelly Mellott