38% of Equity Borrowers Underwater
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- Kirk Haverkamp | June 07, 2011
Homeowners with a home equity loan are more than twice as likely to be underwater on their mortgage(s) as those with only a single mortgage on their property, according to new figures from the data and analytic firm CoreLogic.
The firm reported today that nearly two out of five borrowers with second mortgages – 38 percent – were underwater on their home loans during the first quarter of 2011, that is, owing more on their mortgages than their home is worth. By comparison, only 18 percent of those with only a primary mortgage were found to be underwater.
A total of 10.9 million homes were reported underwater nationwide, down slightly from 11.1 million in the last quarter of 2010. That decline closely matches the 217,000 homes lost to foreclosure in the first quarter of the year, as previously reported by RealtyTrac. Nationally, more than one out of five homes with a mortgage – 22.7 percent – were reported underwater on their loans in the first quarter.
The high rate of homes in negative equity is one of the major causes of the ongoing weakness in the housing market, as underwater homeowners are at heightened risk of foreclosure, as Mark Fleming, chief economist for CoreLogic, explained.
“Many borrowers in negative equity are still able and willing to make their mortgage payments,” Fleming said. “Those in negative equity and impacted by an income shock of some kind, such as a job loss, divorce, or death, are much more likely to be at risk of foreclosure or a short sale.”
Fleming said that negative equity will likely restrain the housing market for some time to come, by making it more difficult to sell and refinance homes, despite signs of a gradual economic recovery.
On average, underwater homeowners in negative equity owed $65,000 more on their home loans than their property was worth. The biggest gap was in New York state, where underwater homeowners were “upside down” by an average of $129,000. The smallest gap was in Ohio, where the average underwater homeowners was down by $31,000.
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