California and Florida Hit Hard in Underwater Mortgages, Arizona and Nevada Hit Still Harder

California and Florida Hit Hard in Underwater Mortgages, Arizona and Nevada Hit Still Harder

California and Florida each have about 2 million underwater mortgages, and together account for more than a third of the underwater mortgages nationwide. But, Nevada and Arizona have a much greater percentage of mortgaged properties that are underwater.

The entire nation is feeling the pain of troubled homeowners who have underwater mortgages, or mortgages in which they owe more on their home than it is actually currently worth.  Estimates suggest that 10.9 million homes nationwide, or 22.5 percent of the US’s housing stock, is currently underwater.

California is the nation’s most heavily populated state with approximately 36 million people.  It also has one of the highest ratios of underwater mortgages. According to CoreLogic, a Santa Ana, California data firm, more than 2 million homeowners in the Golden State currently owed more on their home than its market value at the end of the second quarter of 2011.  The 2 million underwater mortgages in California represents approximately 30% of the state’s total outstanding mortgaged homes.

Estimates suggest that there are also as many as 2 million underwater mortgages in Florida. The Sunshine State’s population is half that of California, and those 2 million underwater homes represent 45% of its total mortgages homes. With a combined total of 4 million underwater homes, California and Florida together represent almost 40% of the nation’s total underwater homes. 

While California and Florida have most of the nation’s underwater homes by volume, in some other states underwater mortgages are almost at epidemic proportions.  Nevada has the highest percentage of homes with negative equity with a staggering figure of about 60% of its total mortgaged properties.  Arizona isn’t too far behind Nevada with 49%.  In Michigan, approximately 36% of mortgaged homes are underwater.

More and more homeowners who find themselves underwater on their homes are not able to refinance their mortgage loans. Many of them would benefit from a refinance because mortgage rates are currently at historic lows. But because of negative equity and other problems, they are stuck in this situation with very few options.

About 8 million underwater homeowners (or about 75%) cannot refinance their current mortgage rates and are still paying rates higher than 5%.  By contrast, approximately 53% of homeowners who have above-water mortgages are paying rates higher than 5%.

While the news for underwater homeowners isn’t good, it also isn’t good for those who live on their block.  Research suggests that in the ZIP codes where there are the highest percentages of underwater mortgages, home sales dropped by more than 80 percent.   According to an article in the OC Register in Orange County, one of the more affluent areas of California but also one of the areas where underwater home levels are at their highest, the average listing price for a home fell to $450,000 in August 2011, or a 6.5% drop year-over-year. The average length of time that an Orange County home is on the market is currently 87 days, a 7% increase year-over-year.

There just is not a lot of good news for current homeowners, especially the ones that are underwater on their home mortgages. Hopefully things will turn around soon before they get much worse.

Check out refinancing rates.

Image: Image courtesy of Stuart Miles at FreeDigitalPhotos.net

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