CoreLogic, based in Santa Ana, Calif., has released negative-equity data showing that 22.8% of all residential properties with a mortgage – 11.1 million homes – were in negative equity at the end of the fourth quarter of 2011. This is up from 10.7 million properties (22.1%) in the third quarter of 2011.
Furthermore, CoreLogic has determined that an additional 2.5 million borrowers had less than 5% equity – referred to as near-negative equity – in the fourth quarter. Together, negative equity and near-negative equity mortgages accounted for 27.8% of all residential properties with a mortgage nationwide in the fourth quarter, up from 27.1% in the previous quarter.
Nationally, the total mortgage debt outstanding on properties in negative equity increased from $2.7 trillion in the third quarter to $2.8 trillion in the fourth quarter. Nevada had the highest negative-equity percentage, with 61% of all of its mortgaged properties underwater, followed by Arizona (48%), Florida (44%), Michigan (35%) and Georgia (33%). The top five states combined have an average negative-equity share of 44.3%, while the remaining states have a combined average negative-equity share of 15.3%.
‘Due to the seasonal declines in home prices and slowing foreclosure pipeline, which is depressing home prices, the negative-equity share rose in late 2011,’ says Mark Fleming, chief economist at CoreLogic. ‘The negative-equity share is back to the same level as the third quarter of 2009, which is when we began reporting negative equity using this methodology.
‘The high level of negative equity and the inability to pay is the 'double trigger' of default, and the reason we have such a significant foreclosure pipeline,’ Fleming adds. ‘While the economic recovery will reduce the propensity of the inability to pay trigger, negative equity will take an extended period of time to improve, and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures.’