More than 11.2 million mortgaged homes were in negative equity at the end of the first quarter – down slightly from the 11.3 million properties in negative equity at the end of 2009, according to a new report from CoreLogic. An additional 2.3 million borrowers were in near-negative equity (i.e., less than 5% equity), the firm adds.
Together, negative equity and near-negative equity mortgages accounted for over 28% of all residential properties with a mortgage nationwide.
Negative equity continues to be concentrated in Nevada, Arizona, Florida, Michigan and California. In Nevada, about 70% of all mortgaged properties were underwater. Arizona held the nation's second highest percentage, at 51%. Las Vegas remains the top-ranked Core Based Statistical Area (CBSA), with 75% of mortgaged properties being underwater, followed by Stockton (65%), Modesto (62%), Vallejo-Fairfield (60%), Calif.
Phoenix had more than 550,000 underwater borrowers at the end of the first quarter – the most households of any metropolitan market in the country, CoreLogic says. Riverside (463,000), Calif.; Los Angeles (406,000); Atlanta (399,000); and Chicago (365,000) round out the top five markets.
The share of borrowers whose mortgage debt exceeds the property value by 25% or more fell slightly to 10.4% or 4.9 million borrowers – down from 10.6% or 5 million borrowers in the fourth quarter of 2009. The aggregate dollar value of negative equity for these deeply underwater borrowers was $656 billion dollars.
The negative-equity share for borrowers with junior liens, such as closed-end second liens or home equity lines of credit, was 38%, compared to 19% for borrowers that did not have a junior lien. The foreclosure rate for borrowers with junior liens was 4%, compared to 2% for borrowers without junior liens.
‘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 her or his lost equity over the next five to seven years, Fleming adds.