One In Five Properties Have Negative Equity

As of the end of December 2008, more than 8.3 million U.S. mortgages, or 20% of all mortgaged properties, were in a negative-equity position – a jump from September 2008's total of 7.6 million, according to First American CoreLogic's latest negative-equity report.

During the fourth quarter of 2008, an average of 230,000 borrowers a month slid into negative equity. California led the way, with a monthly average of 43,000 new negative-equity borrowers, followed by Texas (16,000), Nevada (15,000), Florida (14,000) and Virginia (14,000).

An additional 2.2 million mortgaged properties are approaching negative-equity status, which is defined by the report as mortgages that are within 5% of being in a negative-equity position. Negative-equity and near-negative-equity mortgages combined account for 25% of all residential properties with a mortgage nationwide, First American says.

The distribution of negative equity is heavily skewed to a small number of states. Nevada has the highest percentage of negative equity, as more than half of all mortgage borrowers in that state are now upside down. The average loan-to-value (LTV) ratio for properties with a mortgage in Nevada was 97%, or less than $8,000 in equity.

Michigan was ranked second in the nation, with a negative-equity share of 40% – double the national negative-equity share. Arizona (32%), Florida (30%) and California (30%) rounded out the top five states.

The average negative-equity share for the top five states was 31.9%. If the top five ranked states are excluded, the negative equity share for the remaining states was 13.9%.

In terms of the number of borrowers "underwater," California ranked first, with more than 1.9 million borrowers in negative equity, followed by Florida (1.3 million), Texas (497,000), Michigan (459,000) and Ohio (435,000). The top five states, as ranked by the number of borrowers, accounted for over one-half of the nation's negative equity mortgages.

First American CoreLogic further found that more than 2.2 million – or 5.3% of all mortgaged properties – are in a severe negative-equity position, with LTV ratios of 125% or more. More than 70% of these mortgages are in five states: California (723,000), Florida (432,000), Nevada (170,000), Michigan (128,000), and Arizona (122,000).

"The worrisome issue is not just the severity of negative equity in the "sand' states, but the geographic broadening of negative equity that is expected to occur throughout the year," says Mark Fleming, chief economist for First American CoreLogic.

SOURCE: First American CoreLogic


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