CoreLogic’s Study on Underwater Residential Properties

The housing market hasn’t recovered from the recession and CoreLogic tracts this market through its propriety databases. CoreLogic recently released a study of negative residential equity covering the second quarter of 2011.  CoreLogic provides consumer, financial and property information to businesses.

Negative equity exists if your mortgage balance is higher than the home’s value. This is usually because market value decreased or mortgage debt increased or a combination of both.

There are approximately 48.5 million residential properties with a mortgage in the U.S.; 10.9 million or 22.5 percent of mortgages had negative equity in second quarter of 2011, down from 22.7 percent in first quarter of 2011. An additional 2.4 million had less than five percent equity, which is considered “near-negative equity”. The combined group with negative and near-negative equity are called “below water”. The combined total of the “below water” group was 13.3 million or 27.5 percent.

A larger portion of borrowers with negative equity are paying above market interest rates on their mortgages than those with positive equity. Approximately 58 percent of all mortgages or 28 million are at or above market interest rates of 6 percent or higher and could be eligible to refinance. Of this group, 20 million borrowers have positive equity, which represents 53 percent of above water borrowers. The remaining 8 million borrowers have negative equity, representing 75 percent of all underwater borrowers. Those “below water” are unable to refinance or sell their homes, which has impacted the recovery.

The top five states with negative equity were Nevada, Arizona, Florida, California and Michigan. The average negative equity for these five states declined from 41 percent to 38 percent in the past year. Nevada had the highest decline from 69 percent to 60 percent, which was mainly due to foreclosures.

If you have positive equity, but have mortgage rates above the market price, you might consider refinancing. Mortgage interest rates are at a fifty year low. Check your credit report and credit score to make sure you can take advantage of the excellent rates. I advise getting all three of your reports for free at www.annualcreditreport.com and buy a FICO score on one of them at myFICO.com.

Credit Expert, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, a credit monitoring site.  He is also the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

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