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70% of Nevada Mortgaged Properties Have Negative Equity Position

By Kathryn Bovard

Nevada leads the nation with the highest percentage of negative equity properties according to the First American Core Logic 4th Quarter 2009 Negative Equity Data Report released 2-23-10.  More than 70% of mortgaged properties in Nevada are in a negative or near-negative equity position.

Negative Equity (“underwater or upside down”) refers to the fact that the borrower owes more on their mortgage than the current value of the property.  Negative equity occurs due to a decline in value, an increase in mortgage debt or a combination of both.

The following chart shows the five hardest hit states (Nevada, Arizona, Florida, California, and Michigan).  The average “underwater” mortgage in Nevada is over 50% negative equity.

Here’s an excerpt from the report:

Negative equity continues to be concentrated in five states: Nevada, which had the highest percentage negative equity with 70 percent of all of its mortgaged properties underwater, followed by Arizona (51 percent), Florida (48 percent), Michigan (39 percent) and California (35 percent). Among the top five states, the average negative
equity share was 42 percent, compared to 15 percent for the remaining 45 states. In numerical terms, California (2.4 million) and Florida (2.2 million) had the largest number of negative equity mortgages accounting for 4.6 million, or 41 percent, of all negative equity loans.

The rise in negative equity is closely tied to increases in pre-foreclosure activity and is a major factor in changing homeowners’ default behavior. Once negative equity exceeds 25 percent, or the mortgage balance is $70,000 higher than the current property values, owners begin to default with the same propensity as investors.

Of the over 47 million homeowners with a mortgage, the average loan to value ratio (LTV) is 70 percent. More than 23 million, or 49 percent of all homeowners with a mortgage, have at least 25 percent equity in their home and over 12 million have at least 50 percent equity in their home.

Visit the Q4 2009 Report post and download the full report

Here is a real-world example illustrates the severity in Las Vegas, Clark County.   Borrower / homeowner owes a total of $325,000 on a first and second lien and property is currently valued at $160,000.

If you are a Las Vegas area homeowner facing a potential short sale of foreclosure,
contact Kathryn Bovard today for a no obligation consultation to discuss your options.

Related posts:

  1. Las Vegas Nevada Leads the Nation’s Foreclosure Rate for 43rd Straight Month
  2. Negotiating Short Sales in Las Vegas Nevada
  3. December 2009 Las Vegas Market & Short Sale Report

Categories : Las Vegas Market

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