Drowning in the Desert

Arizona second in underwater loansPhoenix Business Journal – by Jan Buchholz
Arizona has more homeowners who are underwater with their mortgages than any other state, save one.

About 48 percent of homeowners here owe more on their mortgages than the home is worth. That is second only to Nevada where 65 percent of homeowners have what is called “negative equity” in their homes. The data comes from First American CoreLogic, a data and real estate analysis firm based in Santa Ana, Calif.

Another 5 percent of homeowners in Arizona are very close to owing more than their houses are worth, according to the study released this week by First American.

Other states with high percentages of negative equity mortgages are Florida (45 percent), Michigan (37 percent) and California (35 percent).

The percentages are the ratio of negative equity loans as compared with all home loans in the state. In terms of total numbers of negative equity mortgages, however, California and Florida have the most vulnerable loans with 4.4 million total or 42 percent of all negative equity loans in the U.S.

Other findings of the study:

Nearly 10.7 million home loans, or 23 percent of all residential mortgages, have negative equity as of September. Another 2.3 million loans have less than 5 percent equity.

Most of the negative equity loans are in five states: Arizona, Nevada, Florida, Michigan and California.

Most of the borrowers who owe more than their houses are worth purchased their properties between 2005 and 2008. About 40 percent of all negative equity mortgages were obtained in 2006.

Most of the current negative equity mortgages are adjustable rate loans, which allowed buyers to have smaller monthly payments for the short term.


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