Worst markets for underwater borrowers

Homes with 'negative equity' are still a drag on the US property market.

By MSN Real Estate partner May 20, 2014 11:59AM

(© Steven Puetzer/Getty Images)By Quentin Fottrell, MarketWatch  

 

The number of homes in negative equity has fallen as the housing market has recovered in recent years, but new data shows they're still holding back the housing rebound in some areas.

 

In large pockets of the country, the percentage of underwater homes — where the value of the home is less than the remaining mortgage — remains high, according to a new analysis of nationwide data from real estate data firm RealtyTrac. Although they don't bring down property values in the same way as foreclosures, they're still "hobbling" the housing recovery by keeping potential buyers stuck in the mud, the report says.

 

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After surveying more than 1,130 counties, RealtyTrac found 241 where over 20 percent of properties with a mortgage are seriously underwater — and 136 counties where over 25 percent of properties with a mortgage are seriously underwater (defined as a property with a loan to value ratio of 125 percent or more). These 377 counties had a combined population of nearly 130 million people. The average unemployment rate was 7.5 percent in December 2013 in the first group of counties and 7.8 percent in the latter, compared with 6.7 percent nationwide.

Here are the five counties with the highest percentage of homes seriously underwater:

  1. Beaufort County, N.C.: 81 percent
  2. Clayton County, Ga.: 57 percent
  3. Payne County, Okla.: 55 percent
  4. Modoc County, Calif.: 50 percent
  5. Le Flore County, Okla.: 49 percent

 

And here are the five counties with a population of more than 1 million people that have the highest rates:

  1. Wayne County, Mich.: 48 percent
  2. Cuyahoga County, Ohio: 41 percent
  3. Clark County, Nevada: 37 percent
  4. Cook County, Ill.: 35 percent
  5. Orange County, Fla.: 33 percent

"Underwater mortgages are still a problem in Florida and parts of California and Nevada where the housing bubble was most extreme," says Susan Wachter, professor of real estate and finance at The Wharton School of the University of Pennsylvania. In these areas, it's particularly likely that first-time homeowners, who would normally trade up after an average of six years, remain in their homes, reducing the number of homes available for first-time buyers. "But underwater mortgages are no longer a national problem and they no longer threaten to reverse the national recovery," Wachter says.

 

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18Comments
Jun 1, 2014 8:07PM
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In general home prices are still a bubble compared to historic norm. According to case shiller index, we are still 20% above long term averages. Typical bottom comes at 20% below average. When the money supply deflates, existing prices and salaries cannot be sustained.....Current economic activity is funded by debt. It is not going to last forever. When the pay back time arrives, it is going to get very ugly. An entire nation cannot borrow for decades from the future and then hope that all will be fine when the future arrives....Homeowners will have to start thinking of homes as places to live and raise a family instead of something to "invest" in.......and please......Note to All....don not tap into the equity ...if your lucky enough to have any in your home
Jun 1, 2014 5:29PM
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The houses that are under water are the result of the 4 Ps (Piss Poor Prior Planning).

Jun 1, 2014 1:05PM
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I agree with all you said - but our gov. is NOT clueless.  They are in for all they can get and don't apologize for it.  As a matter of fact - they really don't care what we think, and that needs to change.  Can we start this November?
Jun 1, 2014 12:49PM
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In Orange County - Orlando- Florida, when you look at the Foreclosures you see average homes that sold for a lot of money. Some neighborhoods look bad because of the people underwater not taking care of their homes or yards. It takes over 2 years to complete a Foreclosure in Florida and in selected hard hit areas it is keeping home values down.
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Joke programs like HAFA and HARP do not help. The Banks took billions under TARP and give the rest of us the finger, congress takes the bribes and holds their hand in the biggest crime ever committed and Joe and Jane Subject are left to dig out of the hole they made.
Jun 1, 2014 11:27AM
Jun 1, 2014 11:15AM
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The Fed will continue distribution to the wealthy under the guise of 'stimulus'. Americans are getting robbed by their own bought and paid for Gov. Good thing they are too clueless to realize it.
Maybe if they cut food stamps again they can balance their budget.

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Note to Selt: Do not vote for Tea Party of Repulican candidates in any of listed states above.  Oh ya! All states, except Illinois, have Republican legislatures and govenors>

 

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