Underwater Mortgages Decline for Second Consecutive Quarter

The tide appears to be turning on the number of mortgages that exceed value.  CoreLogic has calculated that 11 million homes have loans outstanding that are more than the value of the home, or 23% of all outstanding loans on residential properties.  That’s the good news.

The bad news is that almost all of the change occurred because of foreclosures that have sent values back to earth, not because of appreciable gains in market value.

When loans that have only 5% or less of equity are added in, the total of underwater loans is around 28%.  Interestingly, in markets where few homes are underwater, values rose .5 to 1%, while in markets where underwater mortgages are very prevalent, values actually fell across the board.

The negative equity problem is concentrated in five states: Nevada (68% negative equity in the second quarter); Arizona (50% negative equity); Florida (46% negative equity); Michigan (38% negative equity); California (33% homes under water).