Many area homeowners are ‘underwater’ .
In Fort Worth-Arlington, 12.3 percent, or 46,082, of all residential properties with a mortgage were in negative equity – or underwater – as of September, based on CoreLogic’s methodology factoring in amortization and utilization rates for home equity lines of credit, or HELOC.
By comparison, CoreLogic numbers show the Austin-Round Rock area to have 9.7 percent, or 29,685, underwater homeowners as of September and the Houston-Sugar Land-Baytown area to have 11.71 percent, or 106,968, negative equity homeowners.
Even so, all of the Texas metropolitan areas are far below the national average of 23 percent of homeowners.
Negative equity, often referred to as ‘underwater’ or ‘upside down,’ means that borrowers owe more on their mortgage than their homes are currently worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.
CoreLogic recently rolled out its negative equity tracking system as the trend of underwater borrowers has grown in the last year.
Mark Fleming, chief economist with First American CoreLogic, said negative equity is a problem in nearly every housing market.
“Negative equity continues to be pervasive and to impact almost every segment of the housing market,” he said. “The recent improvement in home prices this past spring and summer has slowed the increase in negative equity, but it will take a significant rebound in home prices, which we are not expecting, to offset the dampening effects of negative equity in the most depressed states.”
According to the First American report, nearly 10.7 million, or 23 percent, of all residential properties with mortgages throughout the United States were in negative equity as of September. First American CoreLogic’s data includes 47 million properties with a mortgage, which accounts for more than 90 percent of all mortgages in the country.
An additional 2.3 million mortgages were approaching negative equity, meaning they had less than 5 percent equity, according to the data. Together, negative equity and near negative equity mortgages account for nearly 28 percent of all residential properties with a mortgage nationwide.
The distribution of negative equity is heavily concentrated in five states: Nevada (65 percent), Arizona (48 percent), Florida (45 percent), Michigan (37 percent) and California (35 percent).
“The rise in negative equity is closely tied to increases in pre-foreclosure activity,” the report states. “At one end of the spectrum, borrowers with equity tend to have very low default rates. At the other end, investors tend to default on their mortgages once in negative equity more ruthlessly: their default rate is typically 2 to 3 percent higher than owner-occupied homes with similar degrees of negative equity.”
The bulk of underwater borrowers, as a group, share certain characteristics, the report states, such as they financed their properties between 2005 and 2008, with 2006 being the peak year in which 40 percent of borrowers were in negative equity.
And according to the report, the average mortgage debt for properties in negative in equity was $280,000 nationwide with underwater borrowers upside down in their loans by an average of nearly $70,000.
“Negative equity continues to be a problem even for 2009 originations as evidenced by a negative equity share of 11 percent and another 5 percent near negative equity,” the report states.
