Nearly 25% of all mortgages are underwater

By Les Christie, staff writer


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.

"Since we expect home prices to slightly increase during 2010, negative equity will remain the dominant issue in the housing and mortgage markets for some time to come," said Fleming. To top of page


Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.78%3.79%
15 yr fixed2.98%2.93%
5/1 ARM3.06%2.99%
30 yr refi3.85%3.85%
15 yr refi3.05%3.00%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 18,080.14 21.45 0.12%
Nasdaq 5,092.09 36.02 0.71%
S&P 500 2,117.69 4.76 0.23%
Treasuries 1.92 -0.03 -1.54%
Data as of 5:43am ET
Company Price Change % Change
Microsoft Corp 47.87 4.53 10.45%
Apple Inc 130.28 0.61 0.47%
Comcast Corp 59.64 0.41 0.69%
AT&T Inc 34.01 -0.22 -0.64%
Xerox Corp 11.99 -1.15 -8.75%
Data as of Apr 24

Sections

A major earthquake was the last thing Nepal needed. Even before one of the country's major fault lines rumbled to life, the country was beset by challenges. More

Stars of Youtube, Vine, Snapchat, and Twitter are attending this year's White House Correspondents' Dinner. More

A Girl Scouts Cookie Oven rolling out to Wal-Mart, Target, Kmart stores this summer will let you bake those iconic thin mints right at home. More