NEW YORK (CNNMoney.com) -- More bad news on the housing bust front: Nearly 25% of all mortgage borrowers were underwater, meaning they owe more on their loans than their homes are worth.
First American CoreLogic, the research firm that monitors housing equity, reported Tuesday that 11.3 million homeowners -- or 24% of all homes with mortgages -- were underwater as of the end of 2009. That's up from 23% and 10.7 million borrowers three month earlier.
Nevada was the state with the worst record at 70% of all mortgaged properties underwater. That was followed by Arizona (51%), Florida (48%), Michigan (39%) and California (35%).
For many homeowners, being underwater, also know as negative equity, has few consequences. If they're not planning to sell and can afford their monthly bills, they can wait out the downturn.
For others, however, plunging underwater can spell disaster. If they become unemployed or have a financial emergency, they have no equity to tap. Or, if they need to downsize or sell their home to relocate for a job, they can't.
"Negative equity is a significant drag on both the housing market and on economic growth,"said Mark Fleming, chief economist with First American CoreLogic. "It is driving foreclosures and decreasing mobility for millions of homeowners."
Traditionally, being underwater was one of two main factors in determining a borrower's likelihood of foreclosure. The other is having sufficient income to pay bills. But, there's an increasingly important exception: strategic default. As equity gets more and more negative, some homeowners are choosing to quit paying and give the keys to the bank.
As long as negative equity remains a big problem, it will be difficult to stem the tide of foreclosures that continue to plague many local real estate markets around the nation.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.43%||3.40%|
|15 yr fixed||2.69%||2.66%|
|30 yr refi||3.44%||3.44%|
|15 yr refi||2.73%||2.72%|
Today's featured rates:
HSBC banker arrested at JFK airport as he prepared to leave the country. He and former trader face federal charges they manipulated currency trades. More
Americans are growing more hesitant to eat out. Whether the slowdown is being driven by rising prices, slowing job growth or even terrorism, some believe it could be the start of a painful restaurant recession. More
Reporter Anthony Ponce moonlighted as a Lyft driver for months to get strangers to open up in the backseat of his car. Now he's going to do it full time and produce a podcast: Backseat Driver. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
It's about to get harder for some luxury all-cash home buyers to hide their identity from the U.S. government. More