Look Around: One in Seven is Underwater
Last week, we released our Q2 2008 Real Estate Market Reports, in which we reported that, nationwide, 29.1% of homeowners who purchased in the past five years are currently underwater on their mortgages (i.e., owe more on the mortgage than the house is worth). We also reported that almost half (45%) of those that bought at the national market peak of 2006 currently have negative equity. The first chart below shows the number of homes with negative equity as a percentage of homes sold in each of the last five years (broken out by region). As you can see, homeowners buying in the West at the 2006 peak have been hit the hardest with almost 60% of purchasers in that year upside down currently on their mortgage.
After doing a bit more number-crunching, we’re able now to report these numbers as a percentage of all homes, not just homes sold in a given period. The numbers are even more startling than we expected with almost 14% of all single-family homes in the U.S., regardless of when they were bought, currently in negative equity. That’s one in seven single-family homes in the country underwater right now. The second chart below breaks these numbers out by region as well. Here, the impact of significant market declines in California, Las Vegas and Phoenix are evident in negative equity rates in the West which top 18 percent (almost one in five homes underwater). The lowest rates of negative equity are found in the Northeast with only about 6 percent of homes underwater.
In an earlier analysis at the beginning of this year, Moody’s Economy.com reported rates of negative equity at the time of about 10 percent with a projection for rates to near 14 percent by the end of Q2. Indeed, it does appear that we’ve hit those levels as indicated by our own numbers. With negative equity being a factor in foreclosure rates, these numbers are just one more reminder of the severe strain being felt by many homeowners right now.
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Look Around: One in Seven is Underwater
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