Negative Equity

August 3, 2010 at 5:33 pm (By Randy)

Altogether, just over 14 million of the 75 million owner-occupied homes in the United States are “underwater,” i.e., the homeowners owe more on their mortgage than their house is worth. About half of those owe at least 30% more than their house is worth today, and more than 1 in 4 are paying for mortgages 50% higher than the value of the house they are living in. If the housing market ever returns it’s 20th century norm of 3% annual appreciation, those homeowners might conceivably break even in another 50 years or so, give or take a few decades or generations.

The Nevada numbers probably demonstrate why Harry Reid is in so much trouble. Why he’s still neck-and-neck with Sharron Angle is another story.

(Charts created by: Calculated Risk)


  1. Chickelit said,

    I feel isolated from this problem in the sense that we are quite positive in equity* and yet we are surrounded by sea of negative equity.

    *Which is what one gets for (a) buying in 2000 and not trading “up” since; (b) “underbuying” and using “traditional” debt instruments like downpayments, 15 year loans, and no cash-out refi’s; (c) investing time and money in the local neighborhood.

  2. wj said,

    Randy, I think your key (at the top) for the blue lines has them swapped. first mortgages in negative equity pretty much has to be smaller than total homeowners in negative. The difference being those whose first mortgages are in positive equity, but who have second mortgages which leave them net under water.

  3. Randy said,

    WJ: That’s what I thought at first, but that’s not what it means. (I didn’t make the graphs, the blogger at Calculated Risk did.) As I understand it, the solid blue line does track the percentage of homeowners with a mortgage whose first mortgage leaves them underwater while the dotted blue line tracks the percentage of ALL homeowners with negative equity, including those with a mortgage and no mortgage at all.

  4. PatHMV said,

    Randy, does it say clearly whether this is looking at people only in their primary homes, or might the data include those who are underwater on rental properties they purchased as investments at the height of the market, even if they are not underwater on the home they actually live in?

  5. Randy said,

    Pat: It is my understanding that the data is for homeowner-occupied dwellings. According to the Calculated Risk post linked to at the bottom of mine, the data is “from a recent congressional briefing by Mark Zandi, Chief Economist of Moody’s”

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