SeeCalifornia.com

Pictured are California homes not quite under water during the rainy season, though some may be “underwater” financially.

It’s hard to imagine the stress of living upside down, but for those who owe more on their mortgages than their homes are worth, it’s a very real and stressful situation. My neighbors live a seemingly suburban lifestyle but we noticed that they became less talkative lately, keeping to themselves.  It could be mere coincidence, but tax records show they are upside on their home–and over $36,000 behind in payments.

With two new vehicles, two small children, two big dogs,  a nanny, house maid, exterminator, gardener, a house not far from the beach and weekend vacations in the desert nearly every week, they look like the model family for middle class living. They have good jobs–but something must not be adding up.  They are but two of 13.5 million American borrowers making up over 27% of the American population that’s either underwater on a home mortgage, or in the danger zone of near-negative equity.

As of the last quarter of 2011, California had over 2 million (approx. 2,050,000) near-negative and negative equity mortgages with an outstanding value of close to $2 billion ($1,944,760, 702,362) which is higher than any other state. Percentage-wise, it ranks 6th in loans that are underwater, compared to other U.S. states. Approx. 29.9% of California mortgages are underwater, and another 4.7% are in the “near” category.  While our unemployment continues to be some of the highest in the nation here is how we rank in housing.

U.S. States Ranked by % of Houses Underwater:

1. Nevada had the highest negative equity percentage with 61 % of all of its mortgaged properties underwater
2. Arizona has 48%
3. Florida  has 44%
4. Michigan 35%
5. Georgia 33%
6. California 29.9%

What’s happening? According to  Mark Fleming, chief economist with CoreLogic, seasonal declines in home prices and a slowing foreclosure pipeline is depressing home prices. The negative equity share is back to the same level as Q3 2009. The high level of negative equity and the inability to pay is the ‘double trigger’ of default, and the reason there is such a significant foreclosure pipeline. The economic recovery will reduce the propensity of the inability to pay trigger, but negative equity will take an extended period of time to improve, and if there is a hiccup in the economic recovery, it could mean a rise in foreclosures.

The data was presented in a report published by CoreLogic (corelogic.com), a Santa Ana, California-based company.