Wednesday, 4 March 2009

Negative Equity now affects 20% of US Homeowners

According to Reuters, one in five U.S. homeowners with mortgages owe more to their lenders than their properties are worth. The article has several quite pertinent issues and here are some of the key findings from the study released Wednesday, Feb 4th, by First American Core Logic.

About 8.31 million properties had negative equity at the end of 2008, up 9 percent from 7.63 million at the end of September, The percentage of "underwater" borrowers rose to 20 percent from 18 percent.

Another 2.16 million properties could go underwater if home prices fall another 5 percent, the study shows.

California had 1.9 million borrowers with negative equity at year-end, more than any other state, followed by Florida's 1.28 million. About three in 10 borrowers in both states were underwater.

By other measures, Nevada was the most stressed, with 55 percent of owners having negative equity and borrowers on average owing 97 percent of what their homes are worth. About 28 percent owe more than 125 percent of their homes' value.

Michigan had 40 percent of its homeowners underwater, while Arizona had 32 percent.

New York fared best, with just 4.7 percent of borrowers with negative equity and an average 48 percent loan-to-value ratio, though this could change as employment and bonuses slide in the financial services industry.

According to the S&P/Case-Shiller Home Price Indices, prices of U.S. single-family homes slumped 18.5 percent in December from a year earlier, the biggest drop in the 21-year history of the data.

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