At the end of June nearly 1/4 of all homeowners with mortgages owed more on their homes than the home was worth.
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.
Negative equity is a crucial element in the foreclosure crisis. The Boston Federal Reserve had this to say on the matter.
negative equity is a necessary condition for foreclosure; people rarely lose their homes when they enjoy positive equity....
The empirical evidence on the role of negative equity in causing foreclosures is over-whelming and incontrovertible. Household-level studies show that the foreclosure hazard for homeowners with positive equity is extremely small but rises rapidly as equity approaches and falls below zero.
With that in mind, consider what the Deutsche Bank had to say today about America's real estate situation.
(Bloomberg) -- Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said.
The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.
Let that sink in for a moment: half of all mortgaged homes will be underwater before the economy starts turning around for Main Street. 25 million homes will be at risk of foreclosure.
I guess Deutsche Bank didn't get the memo about the Green Shoots.