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Housing Snapshot: Geographical Differences in Price Changes and Negative Equity

Today saw the release of two housing-related data reports, both of which indicate the persistent weakness in the housing market. S&P/Case-Shiller released its monthly home price indices, which showed that September prices (which are a three-month average of July, August, and September) were down 0.6 percent from the previous month for the 20-city composite index. Of the twenty cities comprising the index, only New York, Portland, and Washington showed (non-seasonally adjusted) price appreciation in September. Three other cities — Atlanta, Las Vegas, and Phoenix— posted new lows in September. Eighteen of the twenty cities posted negative annual changes in prices, ranging from a one-year decline of 9.8 percent for Atlanta to a one-year decline of 0.8 for Dallas. Only two cities posted an annual increase in prices: Detroit at 3.7 percent and Washington, DC, at 1.0 percent. On a seasonally adjusted basis, the Case-Shiller 20-city index has hit a new post-bubble low

The other housing data today come from CoreLogic’s third quarter negative equity report. According to CoreLogic, there are 10.7 million residential properties with a mortgage in negative equity, which is 22.1 percent of mortgage holders. This is down slightly from the second quarter, but still suggests a sizable number of distressed households, many of which are heading to default. The CoreLogic data show wide variation across states in the percentage of mortgage holders that are underwater. Nevada leads the list with 58 percent of all of its mortgaged properties underwater, followed by Arizona (47 percent), Florida (44 percent), Michigan (35 percent), and Georgia (30 percent). These five states have an average negative equity of 41.4 percent, while the remaining states have an average negative equity of only 17.6 percent.

The average underwater borrower has about $65,000 of negative equity, which translates into a total debt overhang of approximately $700 billion nationwide. This aggregate burden varies widely across states. The table below shows state-level data of the number of mortgaged properties that are underwater, the average amount of negative equity for these properties, the aggregate negative equity, and the state’s share of the national mortgage debt overhang. While Nevada has the highest proportion of mortgage holders underwater, it is the sixth highest state in terms of aggregate negative equity. California has about 2 million mortgaged properties underwater, with the average amount of negative equity across these properties of approximately $91,000. This translates into a mortgage debt overhang of about $187 billion, which is the highest among the states and about 27 percent of the total national mortgage debt overhang. Florida has the next highest share of the total national mortgage debt overhang at about 16 percent. The aggregate amount of negative equity in four states (California, Florida, Arizona, and Massachusetts) makes up over 50 percent of the approximately $700 billion of nationwide negative equity overhang. While the housing market is weak throughout much of the country, the distribution of negative equity is concentrated in relatively few states.

State

Negative Equity Mortgages

Average Negative Equity Amount

Aggregate Negative Equity

Percentage Share of National Mortgage Debt Overhang

Alabama

40,299

$45,588

$1,837,134,503

0.26%

Alaska

6,746

$48,790

$329,140,630

0.05%

Arizona

617,876

$58,848

$36,361,059,740

5.21%

Arkansas

24,779

$67,179

$1,664,640,818

0.24%

California

2,030,292

$91,929

$186,642,474,025

26.75%

Colorado

234,275

$43,256

$10,133,746,919

1.45%

Connecticut

106,772

$113,484

$12,116,883,078

1.74%

Delaware

26,008

$80,958

$2,105,552,618

0.30%

Florida

1,911,419

$57,696

$110,281,106,187

15.81%

Georgia

488,310

$40,777

$19,911,851,873

2.85%

Hawaii

22,786

$101,512

$2,313,042,831

0.33%

Idaho

56,526

$46,999

$2,656,681,943

0.38%

Illinois

481,810

$60,034

$28,925,055,478

4.15%

Indiana

67,582

$35,140

$2,374,853,271

0.34%

Iowa

34,899

$59,016

$2,059,587,570

0.30%

Kansas

29,964

$46,917

$1,405,825,831

0.20%

Kentucky

25,220

$71,706

$1,808,437,267

0.26%

Louisiana

NA

NA

$5,092,089,398

0.73%

Maine

NA

NA

$412,872,973

0.06%

Maryland

315,353

$62,546

$19,724,038,568

2.83%

Massachusetts

233,265

$127,214

$29,674,639,520

4.25%

Michigan

477,104

$40,329

$19,241,079,001

2.76%

Minnesota

96,053

$39,556

$3,799,468,665

0.54%

Mississippi

NA

NA

$436,590,063

0.06%

Missouri

123,103

$44,003

$5,416,871,674

0.78%

Montana

9,877

$70,889

$700,165,851

0.10%

Nebraska

22,552

$62,384

$1,406,877,352

0.20%

Nevada

328,369

$81,508

$26,764,864,405

3.84%

New Hampshire

42,410

$53,202

$2,256,300,321

0.32%

New Jersey

308,187

$79,377

$24,463,010,179

3.51%

New Mexico

33,255

$83,705

$2,783,619,942

0.40%

New York

118,764

$131,173

$15,578,666,472

2.23%

North Carolina

187,608

$57,562

$10,799,052,527

1.55%

North Dakota

4,281

$53,837

$230,475,991

0.03%

Ohio

498,174

$31,221

$15,553,267,399

2.23%

Oklahoma

30,550

$64,539

$1,971,668,697

0.28%

Oregon

118,854

$41,102

$4,885,104,154

0.70%

Pennsylvania

146,333

$74,916

$10,962,756,094

1.57%

Rhode Island

48,950

$77,844

$3,810,462,276

0.55%

South Carolina

97,323

$54,152

$5,270,237,719

0.76%

South Dakota

NA

NA

NA

NA

Tennessee

146,458

$41,561

$6,086,985,663

0.87%

Texas

321,551

$44,491

$14,306,014,547

2.05%

Utah

94,755

$44,953

$4,259,514,401

0.61%

Vermont

NA

NA

NA

NA

Virginia

300,924

$64,030

$19,268,194,085

2.76%

Washington

245,694

$52,445

$12,885,445,167

1.85%

Washington, DC

13,907

$81,597

$1,134,766,218

0.16%

West Virginia

NA

NA

$75,208,290

0.01%

Wisconsin

95,551

$55,914

$5,342,622,850

0.77%

Wyoming

NA

NA

$203,843,069

0.03%


Source: CoreLogic

  • Ted Gayer is the vice president and director of the Economic Studies program and the Joseph A. Pechman Senior Fellow at the Brookings Institution. He conducts research on a variety of economic issues, focusing particularly on public finance, environmental and energy economics, housing, and regulatory policy.