Nearly 10.9 million, or 22.5 percent, of all residential mortgages had negative equity at the end of the second quarter of the year, according to a report released Tuesday by the analytics firm CoreLogic.
An additional 2.4 million borrowers had less than 5 percent equity in the second quarter, according to the report, which also shows that nearly three-quarters of homeowners in negative equity situations are also paying higher, above-market interest on their mortgages.
Nevada held the top position in terms of negative equity with 60 percent of all of its mortgaged properties underwater, followed by Arizona (49 percent), Florida (45 percent), Michigan (36 percent), and California (30 percent).
“High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery,” said Mark Fleming, chief economist with CoreLogic in releasing the data.
Fleming added, “The hardest hit markets have improved over the last year, primarily as a result of foreclosures. But nationally, the level of mortgage debt remains high relative to home prices.”
According to CoreLogic, 8 million borrowers with negative equity, or nearly 75 percent of all underwater borrowers, have above market rates.
Since the 2005 sales peak, non-distressed sales in ZIP codes with low negative equity have fallen 61 percent, compared to an 83 percent sales decline in high negative equity zip codes.