Home equity? 18% in Racine are underwater

Home equity? Don't kid yourself.

If you've got a mortgage in Racine, chances are 1 in 5, maybe even 1 in 4, that you actually owe more than it's worth. You're underwater. So much for that down payment you ponied up, those years of making mortgage payments, that myth of appreciating home value.

That's the sad news from First American CoreLogic, a national firm that analyzes real estate, foreclosure and mortgage statistics.

In Racine, 5,440 homes -- 18.2 percent of all properties with a mortgage -- are in negative equity, the firm says. An additional 2,153 mortgages, another or 7.2 percent, are near negative equity. The grim overall figure: 25.4 percent of all outstanding mortgages in negative equity and near negative equity for Racine.

In all of Wisconsin, the company says 69,000 homes are underwater, and another 94,000 are near negative equity -- out of 428,000 home mortgages.

The national report issued by First American CoreLogic says:

More than 8.3 million U.S. mortgages, or 20 percent of all properties with a mortgage, were in a negative equity position as of Dec. 31, according to newly released data. This compares with 7.6 million, or 18 percent, of all mortgages in negative equity as of Sept. 30. Approximately 700,000 additional borrowers slid into a negative equity position in the last quarter. Negative equity, often referred to as "underwater" or "upside down," means a borrower owes more on their mortgage than the home is worth. In addition, the data shows there are 2.2 million mortgages nationwide that are approaching negative equity. These are defined as mortgages within 5 percent of being in a negative equity position. Together, negative equity and near negative equity mortgages account for 25 percent of all residential properties with a mortgage nationwide.

During the fourth quarter of 2008, a monthly average of nearly 230,000 borrowers became "upside down." California led the way with a monthly average of 43,000 newly negative equity borrowers, followed by Texas (16,000), Nevada (15,000), Florida (14,000) and Virginia (14,000).

Nationwide, the distribution of negative equity is heavily skewed to a small number of states. Nevada has by far the highest percentage of negative equity – more than half of mortgage borrowers in that state are now upside down. The average loan to value (LTV) ratio for properties with a mortgage in Nevada was 97 percent, or less than $8,000 in equity leaving the typical mortgaged homeowner with virtually no cushion for the rapidly declining home values. Michigan was ranked second in the nation with a negative equity share of 40 percent, which is double the national negative equity share. Following these two states are Arizona at 32 percent, Florida at 30 percent, and California at 30 percent rounding out the top five states with the highest negative equity. The average negative equity for the top five states was 31.9 percent. If the top five ranked states are excluded, the negative equity share for the remaining states was 13.9 percent.

In terms of the number of borrowers "underwater," California ranked first with more than 1.9 million borrowers in negative equity, followed by Florida (1.3 million) and Texas (498,000).

More than 2.2 million, or 5.3 percent, of all mortgaged properties are in a severe negative equity position with LTVs of 125 percent or more. More than 70 percent of these mortgages are in five states: California (723,000), Florida (432,000), Nevada (170,000), Michigan (128,000), and Arizona (122,000).

"The accelerating share of negative equity, combined with deteriorating economic conditions, means that mortgage risk will continue to increase until home prices and the economy begin to stabilize. Going forward, the worrisome issue is not just the severity of negative equity in the 'sand' states, but the geographic broadening of negative equity that is expected to occur throughout the year," said Mark Fleming, chief economist for First American CoreLogic.