Roughly 11 million residential properties – representing 22.5% of homes nationwide – were in some type of negative equity position at June 30, a miniscule improvement from the first quarter, according to new figures compiled by CoreLogic.
Releasing its new findings, CoreLogic chief economist Mark Fleming declared that, “High negative equity is holding back refinancing and sales activity and is a major impediment to the housing market recovery.”
His comments come in the midst of White House efforts to launch a plan to refinance GSE-related mortgage debt of nearly $2 trillion.
The improvement seen in 2Q11 represented a 0.2% decline in negative equity or “underwater” mortgages.
The Santa Ana, Calif.-based analytics provider found that an additional 2.4 million borrowers have less than 5% equity in their homes and are considered “near-negative equity.”
CoreLogic said that nearly 75% of homeowners in negative equity are paying higher, above-market interest rates on their mortgages.
Negative equity also impacts the ability of borrowers to take advantage of low mortgage rates. There are currently 28 million outstanding mortgages that hold above market rates and should be able to refinance, including eight million mortgages that are in negative equity. More than 40% of severe negative equity borrowers (with loan-to-value ratios of 125% or higher) have mortgage rates of 6% or more, while only 17% of borrowers with positive equity have rates at this level.
Nevada had the most underwater properties in the nation, 60%, a decline of 8% over last year. Arizona had the second most properties in negative equity: 49%, followed by Florida at 45%, Michigan at 36% and California at 30%.
“The hardest hit markets have improved over the last year, primarily as a result of foreclosures,” Fleming said. “But nationally, the level of mortgage debt remains high relative to home prices.”