Profile picture for sndra

What percentage of homes have mortgages that are "underwater"?

  • December 10 2010 - Palm Desert
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Answers (7)

Profile picture for blue screen exile
As foreclosures are delayed, the number remaining underwater remain high.  The solution is to liquidate the foreclosures as quickly as possible.  But the lenders don't want to do that as it drives down their return on the liquidations and it creates balance and reserves issues on their books.  So they delay.  And the government doesn't want rapid foreclosures either as it drives down tax revenue and makes the government statistics look worse.

But another way of looking at it.  Zillow has about 95 million "ownership units" on the website.  So, 10.8 million "underwater" is only about 11.4% of "ownership units".  As houses turn over about once every 7 years on average, about 13.6 million should change hands each year.  So, we are really only talking about the households that bought at bubble peak due to the NAR propaganda and deceptions of Real Estate agents.  And of course congress, HUD and Frannie and Freddie insisting on nothing down, no qualification purchases in order to increase "housing ownership" percentages in the U.S. meant that it doesn't take much for a loan to become underwater with negative equity.  Even a 0.5% drop in estimated value can do that.

And really, you need to look at "all households", not just the ownership households.  As 1/3 of households (per the U.S. Census) are renting, that means that only 7.6% of the U.S. households are in housing with negative equity.  Which is less than the Unemployment rate, so it is absolutely nothing to be concerned about at all.  All it means is that the lenders have a backlog of properties that need to be liquidated.
  • December 14 2010
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Profile picture for sunnyview
I had seen the same statistic. They article that I read said that nationwide about 1 in 4 homes or 25% were underwater. Some markets like Las Vegas have as many as 8 in 10 or 80% of homes underwater here. Many markets have been hit hard and some are continuing to drop here as a result of new foreclosure filings. 

Not every area of the country has a high % of underwater mortgages, but the high numbers of houses with underwater mortgages in the "sand" states bring the nationwide % up overall.
  • December 14 2010
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sndra,

Here is the information from CoreLogic, the company that tracks these things. It's not going to be 100% accurate because they are just using estimates of property values but it's the best we've got.

CoreLogic reported that 10.8 million or 22.5 percent of all residential properties with mortgages had negative equity at the end of the third quarter compared to 11.0 million or 23 percent at the end of the second quarter. This is the third consecutive quarter in which negative equity declined. The aggregate level of negative equity declined to $744 in the third quarter compared to $800 billion at the end of 2009.

Of course these numbers leave out all "free-and-clear" homes, properties without mortgages, so the percentage is actually lower than 22.5% when we factor those properties in, but we can see a clear trend in less homes being underwater over time, although the number is still HUGE.

Greg
  • December 14 2010
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There is no way to accurately answer this question without doing a full appraisal of each home.
  • December 11 2010
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Some areas are much higher than others (percentage wise).  I have recently read that in Vegas 80% of mortgages are underwater.  There we several other cities where the number was over 50%
.

 
  • December 11 2010
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Profile picture for the_country_hick
The number now is only a small part of the equation. Look at the links below. But pay special attention to the change in percentage of those willing to walk away from an underwater house.

Foreclosure Homes Account for 25 Percent of all Q3 2010 Residential Sales
This means foreclosures are a huge part of the housing equation now.

December 17 2009 10% of underwater homeowners would walk away
People were not thinking walking away was the right thing at all.

May 21 2010 41% OF UNDERWATER HOMEOWNERS WOULD WALK AWAY
People are accepting the idea the walking away from your debt is acceptable.

December 7 2010 48 percent of homeowners with a mortgage would walk away
The survey found 57 percent of men would consider walking away compared to 41 percent of women.

Deutsche Sees 48% of All US Mortgages Underwater in 2011

If 1/2 of mortgaged houses are underwater and the amount of people willing to walk away from those underwater mortgages continues to rise Perhaps to over 60% that additional downward pressure on houses will drop prices much further and faster than now anticipated.

The trend is what is important. The trend is for more people to be willing to walk away from underwater mortgages. That trend will cause more foreclosures as prices drop which makes prices drop more which leads to more people walking away which leads to more foreclosures which leads to...
  • December 10 2010
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That is an excellent question. Are you ready for the answer??? 11.2 million homes are underwater for Q1 of this year. Frightening isn't it?
  • December 10 2010
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