The number of underwater properties fell slightly from 10.9 million in the second quarter to 10.7 million at the end of the third quarter, CoreLogic reports. At the end of the third quarter, 22.1% of all U.S. residences were in a negative-equity position, compared to 22.5% one quarter earlier.
According to CoreLogic, another 2.4 million borrowers were in a near-negative equity position at the end of the quarter, meaning they had less than 5% equity.Â Â Â
"Although slightly down, negative equity remains very high and renders many borrowers vulnerable when negative economic shocks occur, such as job loss or illness," says CoreLogic's chief economist, Mark Fleming. "The nearly $700 billion mortgage debt overhang has touched many corners of the market, and this overhang is holding back the recovery of the housing market and broader economy."
For the first time since CoreLogic began tracking this type of data in 2009, California fell out of the top-five states with the highest percentage of negative equity. Nevada secured the top spot, with 58% of all of its mortgaged properties underwater, followed by Arizona (47%), Florida (44%), Michigan (35%) and Georgia (30%).
Combined, the top five states held an average negative equity ratio of 41.4%, while the remaining states had a combined average negative equity ratio of only 17.6%, CoreLogic says.
Of the 10.7 million borrowers in negative equity, there were 6.3 million first liens without home equity loans that have an average mortgage balance of $222,000. According to CoreLogic, these borrowers were underwater by an average of $52,00, which equates to an average loan-to-value ratio (LTV) of 131%. The negative-equity share for the first lien-only borrowers was 18%, and 40% had an LTV of 80% or higher.
The remaining 4.4 million borrowers in negative equity hold first liens and home equity loans with an average mortgage balance of $309,000. These borrowers were underwater by an average of $84,000 and had an average LTV of 137%. The negative-equity share for first-lien borrowers with home equity loans was 38%, or about twice the share for first lien-only borrowers.
More than 60% of borrowers with home equity loans have combined LTVs of 80% or higher.Â
Given that bank portfolios account for 15% of all first-lien mortgages, CoreLogic estimates that 1.6 million properties valued at $105 billion of aggregate negative equity were in bank portfolios at the end of the third quarter.