20% of U.S. Homeowners Have Mortgage Higher Than House Is Worth

Oct. 31 (Bloomberg) -- Almost 20 percent of U.S. mortgage borrowers owed more on their loans in the third quarter than their house was worth as foreclosures depressed prices and the economy weakened, according to First American CoreLogic.

More than 7.5 million properties already have negative equity and another 2.1 million will follow should home prices decline another 5 percent, Santa Ana, California-based First American, a seller of economic and real estate data, said in a report today. Six states account for almost 60 percent of homes with negative equity, led by Nevada and Michigan.

Nevada had the highest share at 48 percent, followed by Michigan at 39 percent, Florida and Arizona each at 29 percent, California at 27 percent, Georgia at 23 percent and Ohio at 22 percent, First American said.

New York had the lowest share of homes with negative equity at 7 percent, followed by Hawaii at 8 percent, Pennsylvania at 9 percent and Mo


``As long as job losses continue and people face resets on their mortgages, the housing market will be under severe distress,'' Sam Khater, a senior economist at First American in Tysons Corner, Virginia, said in an interview. ``We've created an entire class of homeowner that is very sensitive to price changes.''
asr: very true, we created this new class.

Home prices fell in August in all 20 metropolitan areas measured by the S&P/Case-Shiller home-price index, which dropped 16.6 percent from a year earlier and has fallen every month since January 2007. U.S. foreclosure filings rose to a record in the third quarter, and will probably increase as the economy worsens and the availability of financing shrinks, RealtyTrac Inc., a seller of default data, reported on Oct. 22.

The number of houses with loans higher than the property's value may increase to almost 25 percent should prices keep falling, First American said.