States with the Most Homes Underwater

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The housing market is projected to improve in the coming years — albeit slowly. While we are a long way to full recovery, the signs are there. Indeed, according to a CoreLogic report released this month, the number of underwater mortgages has declined from 12.1 million, or 25.2% of all mortgages, at the end of 2011 to 11.4 million, or 23.7% of all mortgages, at the end of the first quarter of 2012.

Read: States with the Most Homes Underwater

Of course, the recovery isn’t even, and while the housing market in some states already may be improving, other states still have a long way to go before their housing markets recover. Based on CoreLogic’s report on negative equity for the first quarter of 2012, 24/7 Wall St. identified the 10 states with the highest percentage of homes with underwater mortgages. The data show that the states with the most negative equity are the ones most severely affected by falling home prices during the recession.

Since the housing bubble burst in 2006, home prices have fallen by 32.6% nationwide. In many cases, the decline in the value of a home was so steep that the amount of debt became worth more than home’s market value.

The amount of outstanding debt compared to total property value in these states is staggering. Nationwide, the value of all mortgaged property is $12.2 trillion. Outstanding debt on those properties is $8.6 trillion. In other words, 70.5% of the value of all homes is in debt. In five of the worst-off states, this relationship, known as the loan-to-value ratio, is 80% or more. In the case of Nevada, it is an unbelievable 114%. Negative equity in the state is more than $13 billion greater than total property value.

Of the 10 states with the highest percentage of mortgages with negative equity, nine have among the greatest declines in home value from the fourth quarter of 2006 to the fourth quarter of 2011. All of the top seven states with the largest housing price declines are on this list, including Nevada, where prices plummeted by nearly 60% during that time.

Local economic hardships usually coincide with falling home prices. For example, unemployment rates are exceptionally high in these states. Six of the states on our list have unemployment rates higher than the national average, including Nevada and California, which have the first and third highest rates in the country, respectively.

Many of the states with high negative equity also have a high percentage of homeowners on the brink of losing their investment. According to April data from CoreLogic, several of these states have among the highest percentage of homes that have been delinquent on their mortgage payments for 90 days or more. Three are in the top four, including Florida, where the rate was 16.8% in April.

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24/7 Wall St. reviewed CoreLogic’s Q1 2012 negative equity report to identify the states with the highest percentage of mortgages with negative equity. We measured this alongside a state’s total property value, mortgage debt outstanding and total home equity. We also looked at the percentage of homes with near negative equity, or homes with the value less than 5% more than the debt owed. Because of sample size, seven states were excluded from the results. These states, which include Wyoming and Vermont, account for fewer than 5% of U.S.’s total population. In addition to CoreLogic’s data, 24/7 Wall St. reviewed a variety of additional metrics. We looked at May 2012 unemployment rates provided by the Bureau of Labor Statistics, and at median income, median home value and poverty rates from the U.S. Census Bureau for 2010. Declines in home value from the fourth quarter of 2006 through the fourth quarter of 2011 were provided by Fiserv. Fourth-quarter 2011 delinquency (90+ days) and foreclosure rates are from CoreLogic. Forecast changes in home value by state are from Fiserv.

These are the states with the most homes underwater.