New data estimate
that 23% of U.S. homeowners owe more money on their mortgages than the
home is worth. That's about 10.7 million households with negative
equity--a grim statistic. Here are in-depth
looks behind the numbers.
- It Gets Worse Barry Ritholtz of the Big Picture explains:
"There are 5.3 million U.S. households with mortgages at least 20%
higher than the home's value. And it gets worse, depending upon the
vintage of the mortgage. During the boom, appreciably worse: Of those
who took out mortgages at the 2006 peak, more than 40% are under water."
- New Methodology The Business Insider's Henry Blodget says
the statistical methods have changed. "First American CoreLogic, which
estimates the numbers many media
outlets use, has changed its methodology from the last survey. It now
no longer assumes that home equity lines of credit have been completely
drawn down (fair), and it credits payments that mortgagors have made to
pay down their principal (duh). The net result is that the housing
situation looks better than it did a few months ago. Still bad, but
- Fuzzy Math Douglas A. McIntyre of 24/7 Wall Street doesn't buy it.
"There have been a number of attempts to come up with a figure about
how many U.S. home mortgages are underwater -- in other words, the value
of the home loan is more than the value of the house.
All estimates are bound to be wrong because no one has had the time
or money to appraise every house in America and match it with the value
of its mortgage plus any second mortgages."
- ..But If It's Right McIntyre elaborates
at AOL News site Daily Finance. "The data makes two salient points: 1)
Negative equity and near negative
equity mortgages account for nearly 28% of all residential properties
with a mortgage nationwide, and 2) The rise in negative equity is
closely tied to increases in pre-foreclosure activity," he writes. "The
news about underwater real estate is nearly as bad for banks as it
is for homeowners. Default rates and foreclosures will almost certainly
continue to rise. Banks will end up owning more and more properties
that they are ill suited to sell"
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