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Negative Equity Concentrated in a Few States

A portion of a mortgage document from one of the civil cases being litigated by New York consumer bankruptcy Attorney Linda Tirelli

Yesterday’s release of CoreLogic’s negative equity report showed that in the fourth quarter of last year there were 11.1 million residential properties with a mortgage in negative equity, which is 22.8 percent of mortgage holders. This is slightly higher than the 10.7 million (22.1 percent) from the third quarter. The CoreLogic data show wide variation across states in the percentage of mortgage holders that are underwater. Nevada leads the list with 61 percent of all of its mortgage properties underwater (an increase from 58 percent in the third quarter), followed by Arizona (48 percent), Florida (44 percent), Michigan (35 percent) and Georgia (33 percent).

The average underwater borrower has about $65,000 of negative equity, which yields an aggregate debt overhang of approximately $717 billion nationwide. This aggregate burden varies widely across states. The table below shows state-level data of the number of mortgage 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 that are underwater, it is the sixth highest state in terms of aggregate negative equity. California has about 2 million mortgaged properties underwater, with an average amount of negative equity across these properties of approximately $92,000. This translates into mortgage debt overhang of about $187 billion, which is the highest among the states and about 26 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.

The administration has recently increased taxpayer-financed incentives to banks to engage in more principal reductions for underwater borrowers, and it has pressured Edward DeMarco, acting director of the Federal Housing Finance Agency, to allow principal reductions for Fannie Mae and Freddie Mac loans. The distribution of negative equity across states suggests that any serious attempt at wide scale principal reductions would reap benefits to borrowers concentrated in only a few states.

State Negative Equity Mortgages Average Negative Equity Amount Aggregate Negative Equity Percentage Share of Nationwide Aggregate Negative Equity
Alabama 43,431 $44,526 $1,933,808,856 0.27%
Alaska 6,273 $48,473 $304,071,971 0.04%
Arizona 631,126 $58,704 $37,049,636,573 5.18%
Arkansas 25,676 $71,662 $1,839,983,520 0.26%
California 2,041,276 $91,621 $187,024,071,967 26.14%
Colorado 241,682 $43,488 $10,510,260,953 1.47%
Connecticut 111,140 $112,147 $12,463,982,075 1.74%
Delaware 28,919 $77,112 $2,229,996,542 0.31%
Florida 1,916,082 $57,905 $110,950,170,016 15.51%
Georgia 541,178 $41,147 $22,267,822,137 3.11%
Hawaii 24,118 $97,578 $2,353,394,765 0.33%
Idaho 64,135 $45,393 $2,911,301,900 0.41%
Illinois 489,535 $59,412 $29,084,236,461 4.07%
Indiana 69,123 $36,369 $2,513,963,937 0.35%
Iowa 38,125 $55,444 $2,113,790,975 0.30%
Kansas 32,552 $44,288 $1,441,668,766 0.20%
Kentucky 26,704 $69,100 $1,845,246,383 0.26%
Louisiana 36,546 $144,987 $5,298,693,940 0.74%
Maine 7,662 $58,723 $449,935,894 0.06%
Maryland 331,159 $63,243 $20,943,444,374 2.93%
Massachusetts 240,887 $127,772 $30,778,641,582 4.30%
Michigan 480,075 $40,143 $19,271,670,396 2.69%
Minnesota 109,407 $38,566 $4,219,372,191 0.59%
Mississippi 11,209 $42,347 $474,669,190 0.07%
Missouri 137,177 $41,959 $5,755,815,289 0.80%
Montana 10,754 $66,122 $711,071,659 0.10%
Nebraska 26,140 $57,584 $1,505,239,249 0.21%
Nevada 343,256 $82,435 $28,296,313,698 3.96%
New Hampshire 47,206 $53,056 $2,504,538,822 0.35%
New Jersey 329,780 $78,782 $25,980,883,310 3.63%
New Mexico 36,898 $82,371 $3,039,337,194 0.42%
New York 122,125 $130,341 $15,917,855,328 2.23%
North Carolina 205,764 $54,865 $11,289,339,673 1.58%
North Dakota 3,763 $58,326 $219,478,984 0.03%
Ohio 526,802 $30,878 $16,266,566,980 2.27%
Oklahoma 33,205 $60,754 $2,017,331,352 0.28%
Oregon 131,126 $40,102 $5,258,416,029 0.74%
Pennsylvania 156,376 $71,702 $11,212,482,487 1.57%
Rhode Island 52,286 $78,393 $4,098,877,472 0.57%
South Carolina 99,936 $52,123 $5,208,989,529 0.73%
South Dakota NA NA NA NA
Tennessee 162,058 $39,203 $6,353,082,233 0.89%
Texas 347,021 $43,374 $15,051,777,345 2.10%
Utah 100,687 $43,879 $4,418,092,031 0.62%
Vermont NA NA NA NA
Virginia 303,800 $63,596 $19,320,458,450 2.70%
Washington 271,505 $50,279 $13,651,107,650 1.91%
Washington, DC 12,446 $83,987 $1,045,297,365 0.15%
West Virginia 1,225 $76,345 $93,522,139 0.01%
Wisconsin 104,548 $54,206 $5,667,083,140 0.79%
Wyoming 5,056 $44,377 $224,371,648 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.