By Nick Timiraos
Home price declines may be luring more home buyers back to the market, but they’re also leaving more American homeowners with negative equity.
Some 24% of owner-occupied homes had mortgage debt that exceeded the values of those homes at the end of June, according to data from Equifax and Moody’s Economy.com. That number rises to 32% when looking at the share of homeowners with mortgages that don’t have equity left in their homes.
Overall, 16 million homeowners are “upside-down” on their mortgages, up from 10 million, or 15% of owner-occupied homes, one year ago.
Nearly 10% of owner-occupied homes now have mortgage debt with loan-to-value ratios of at least 125%, and roughly half of those homes have mortgage debt with loan-to-value ratios of 150% or more.
The rising share of homeowners without equity and the foreclosure crisis continues to be the biggest storm cloud facing any possible economic recovery, says Mark Zandi, chief economist at Moody’s Economy.com. “That such a high proportion of homeowners are underwater is testimony to the severity of the foreclosure crisis and the risk that it still poses to the broader economy,” he said.
To date, most foreclosure-rescue efforts have focused on lowering monthly payments by reducing interest rates, in part because the housing crisis began with mortgages that were resetting to higher payments. But the looming negative-equity problem could put more pressure on policymakers to come up with a modification plan that includes reducing loan balances, and not just lowering interest rates.
“The modification plans that they have in place … will become increasingly ineffective as more homeowners fall deeply underwater,” says Mr. Zandi.
Unsurprisingly, the negative equity issue remains most severe in the sand states. Some 40% of owner-occupied homes in Nevada are underwater, followed by Arizona (37%), California (33%), and Colorado (31%).
Click on the column headers to sort the chart below.
| State | % Underwater |
| Nevada | 40% |
| Arizona | 37% |
| California | 33% |
| Colorado | 31% |
| Michigan | 29% |
| Idaho | 30% |
| Minnesota | 28% |
| Georgia | 29% |
| New Hampshire | 28% |
| Ohio | 26% |
| Utah | 26% |
| Alaska | 28% |
| South Dakota | 27% |
| Missouri | 26% |
| Indiana | 25% |
| Wyoming | 28% |
| Washington | 25% |
| Iowa | 23% |
| Nebraska | 22% |
| Florida | 27% |
| Montana | 25% |
| Massachusetts | 24% |
| Oregon | 23% |
| Virginia | 22% |
| Kentucky | 23% |
| Rhode Island | 22% |
| Maryland | 20% |
| North Carolina | 22% |
| Illinois | 21% |
| Kansas | 19% |
| New Jersey | 20% |
| Tennessee | 20% |
| Connecticut | 20% |
| Maine | 21% |
| Texas | 20% |
| Vermont | 20% |
| South Carolina | 22% |
| New Mexico | 22% |
| Alabama | 21% |
| Wisconsin | 19% |
| Delaware | 19% |
| Arkansas | 20% |
| District Of Columbia | 20% |
| Pennsylvania | 17% |
| Oklahoma | 17% |
| Hawaii | 18% |
| North Dakota | 16% |
| New York | 18% |
| Mississippi | 17% |
| Louisiana | 16% |
| West Virginia | 13% |
Source: Moody’s Economy.com
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