CoreLogic: 24% of residential properties upside down

February 23, 2010

You don’t keep paying for something that you own.

From FirstAmerican Core Logic:

…more than 11.3 million, or 24 percent, of all residential properties with mortgages were in negative equity at the end of the fourth quarter of 2009, up from 10.7 million and 23 percent at the end of the third quarter of 2009. An additional 2.3 million mortgages were approaching negative equity at the end of last year, meaning they had less than five percent equity. Together, negative equity and near-negative equity mortgages accounted for nearly 29 percent of all residential properties with a mortgage nationwide.

Negative equity means the mortgage balance is higher than the value of the home.

The bulk of underwater properties are concentrated in five states: California, Florida, Nevada, Arizona and Michigan. Nevada leads the way in terms of most homes with negative equity at a whopping 70 percent.

“Home-ownership” is badly defined by, for instance, the Census Bureau, which considers all “owner-occupied housing units” in its calculation of the home-ownership rate.

But the rate would be far lower if one simply calculated the amount of equity that Americans have in their homes. Since this is the portion of real estate for which they don’t pay anything, it is the only portion that is truly “owned.”

Subtract folks who owe more on their homes than they are worth and the home-ownership rate drops from 67% to 43%.

Update: Reader Dan Hess offers a better calculation in the comments. He correctly notes that underwater homes are 24% of homes with mortgages, not 24% of all homes as I implied in the math above. Backing out these homes would reduce the homeownership rate to 57%. Though backing out ALL mortgage debt, even on homes with owner equity, would lower the ownership rate even more.

This isn’t merely academic. Having equity in their homes is a big reason homeowners keep paying their mortgage, which is necessary for banks to stay solvent.


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nice point to raise, on what constitutes ownership, for ownership definitely drivers behavior in terms of walk aways.

I wish more stats would show “ownership” on a debt equity basis like you mention.

Posted by Nick_Gogerty | Report as abusive

Rolfe, good post, but one significant math error. You said:

“Subtract folks who owe more on their homes than they are worth and the home-ownership rate drops from 67% to 43%.”

Actually, of owner-occupied units, 38% are mortgage-free according to the most recent available data. 7_mortgage_characteristics_owner_occupie d_units.html

Thus, of that 67% a 38% share or 25% of all residences are owned free-and clear by the resident. Thus, 42% of all residences are owner-occupied and have a mortgage.
Thus, 24% of the 42% of homes with mortgages are underwater, or 10% of all residences.

Thus we have:
25% of residences owned-free and clear by the householder
32% of residences owned by householder, with a mortgage that is not underwater
10% of residences owned by a householder who is underwater
33% of householders rent

Thus, 57% and not 43% is the homeownership rate that you mean.

Posted by DanHess | Report as abusive

[...] Source Article [...]

[...] permalink Useful discussion of home ownership rate in comments [...]

Market analysis based on homeownership

Posted by dogster | Report as abusive

[...] Meanwhile, bonuses on Wall Street rose 17% while 24% of homes are upside down. [...]

[...] Meanwhile, bonuses on Wall Street rose 17% while 24% of homes are upside down. [...]

[...] because they owe more on the mortgage than the current market value of the house. According to a report from Core Logic, 24% of mortgages are upside down in the US. Some states are considerably worse [...]