Average value of home with “underwater” mortgage $210,300 – Average loan balance $280,000 – Average amount “upside down” $70,000
Dennis Norman
According to a report released today by First American CoreLogic nearly 10.7 million U.S. mortgages, or 23 percent of all mortgaged properties, are in a negative equity position meaning the borrowers owe more on their mortgage than their home is worth as of September 30, 2009.
If you read my postabout CoreLogics last negative-equity report in August, this may sound like a huge decrease in underwater loans from the over 32 percent reported then. 
Unfortunately, that is not the case, it is actually a change of methodology by CoreLogic: they now a model that factors in loan amortization and utilization rates for home equity lines of credit and feel they are now providing a more precise view of “underwater borrowers”. If this report was done using the same methodology as the August report then the percentage of borrowers underwater would have increased to 33.8 percent.
Other highlights from the report are:
- In addition to the 10.7 million borrowers with negative equity there are an additional 2.3 million borrowers that have mortgages approaching negative equity (they have less than 5 percent equity). Together these two groups account for 28 percent of all residential properties with a mortgage nationwide.
- The five states with the highest percentages of negative equity loans are: Nevada (65 percent), Arizona (48 percent), Florida (45 percent), Michigan (37 percent) and California (35 percent)
- The bulk of “upside down” borrowers, as a group, share certain characteristics. They:
- Financed their properties between 2005 and 2008, with 2006 being the peak year where 40 percent of borrowers were in negative equity.
- Purchased newly built homes that are concentrated in a small number of states. For homes built between 2006 and 2008, the negative equity share is 40 percent.
- Relied on adjustable rate mortgages (ARMS)
- Bought less expensive properties. The average value for all properties with a mortgage is $270,200, but properties in negative equity have an average value of $210,300 or 22 percent less. The average mortgage debt for properties in negative equity position was $280,000 meaning the average “upside down” borrower is upside down to the tune of $70,000 or 33.2 percent of the value of their home.
