Large swaths of Central Valley under water – mortgage-wise

SANTA ANA
June 7, 2011 6:48am

There are 10.9 million homes in the United States, or 22.7 percent of all residential properties with a mortgage, that were in negative equity at the end of the first quarter of 2011, according to a new report Tuesday from CoreLogic Inc. (NYSE: CLGX), a Santa Ana-based financial information company.

That means the owners owed more on their mortgages than their houses were worth.

But the Central Valley sets the nation’s deepwater mark for underwater homes, with as many as 501,142 homes underwater at the end of the first quarter, according to CoreLogic.

Stockton is in the deep end of the pool with 55.6 percent of all homes with a mortgage worth less than the paper on them. That’s second in the nation after Las Vegas’ 66 percent. Modesto ranks third, tied with Phoenix, Ariz., at 55 percent.

Nationally, the figures are down slightly from 11.1 million, or 23.1 percent, in the fourth quarter of 2010. An additional 2.4 million borrowers had less than 5 percent equity, referred to as near-negative equity, in the first quarter. Together, negative equity and near-negative equity mortgages accounted for 27.7 percent of all residential properties with a mortgage nationwide. In the fourth quarter, these two categories stood at 27.9 percent.

Negative equity, often referred to as "underwater" or "upside down," means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

Here are CoreLogc’s water measurements for most of the Central Valley’s metro areas. Figures for Merced and Chico were not immediately available:

• In Bakersfield-Delano, 49.30 percent, or 74,606, of all residential properties with a mortgage were in negative equity for first quarter 2011. An additional 5.80 percent, or 8,722, were in near negative equity in Bakersfield-Delano.

• In Fresno, 45.60 percent, or 69,149, of all residential properties with a mortgage were in negative equity for first quarter 2011. An additional 5.40 percent, or 8,114, were in near negative equity in Fresno.

• In Modesto, 54.60 percent, or 52,973, of all residential properties with a mortgage were in negative equity for first quarter 2011. An additional 5.30 percent, or 5,134, were in near negative equity in Modesto.

• In Sacramento (including the Arden-Arcade neighborhood and the city of Roseville), 41.70 percent, or 203,818, of all residential properties with a mortgage were in negative equity for first quarter 2011. An additional 5.20 percent, or 25,272, were in near negative equity in metropolitan Sacramento.

• In Visalia-Porterville, 42.70 percent, or 29,692, of all residential properties with a mortgage were in negative equity for first quarter 2011. An additional 5.30 percent, or 3,697, were in near negative equity in Visalia-Porterville.

• In Stockton, 55.60 percent, or 70,904, of all residential properties with a mortgage were in negative equity for first quarter 2011. An additional 5.30 percent, or 6,718, were in near negative equity in Stockton.

While the average negative equity borrower was upside down by $65,000, there were wide disparities by state. New York borrowers were upside down by an average of $129,000, the highest average in the nation, followed by other high housing cost states: Massachusetts ($120,000), Connecticut ($111,000), Hawaii ($98,000) and California ($93,000). Ohio's negative equity borrowers were upside down by $31,000, the lowest average in the nation, followed by Indiana ($34,000) and Minnesota ($38,000).

"Many borrowers in negative equity are still able and willing to make their mortgage payments. Those in negative equity and impacted by an income shock of some kind, such as a job loss, divorce, or death, are much more likely to be at risk of foreclosure or a short sale,” says Mark Fleming, chief economist with CoreLogic. “The current economic indicators point to slow yet positive economic growth, which will slowly reduce the risk of borrowers experiencing income shocks. Yet the existence of negative equity for the foreseeable future will weigh on the housing market recovery by holding