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States with the most homes underwater

Julie Jacobson / AP file

No state has been hit harder by the housing downturn than Nevada. Between the end of 2006 and the end of 2011, home values have tanked nearly 60 percent, higher than any other state by 7.2 percentage points.

The housing market is projected to improve in the coming years -- albeit slowly. While we are a long way to full recovery, the signs are there. Indeed, according to a CoreLogic report released this month, the number of underwater mortgages has declined from 12.1 million, or 25.2 percent of all mortgages, at the end of 2011 to 11.4 million, or 23.7 percent of all mortgages, at the end of the first quarter of 2012.

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Of course, the recovery isn’t even, and while the housing market in some states already may be improving, other states still have a long way to go before their housing markets recover. Based on CoreLogic’s report on negative equity for the first quarter of 2012, 24/7 Wall St. identified the 10 states with the highest percentage of homes with underwater mortgages. The data show that the states with the most negative equity are the ones most severely affected by falling home prices during the recession.

Since the housing bubble burst in 2006, home prices have fallen by 32.6 percent nationwide. In many cases, the decline in the value of a home was so steep that the amount of debt became worth more than home’s market value.

The amount of outstanding debt compared to total property value in these states is staggering. Nationwide, the value of all mortgaged property is $12.2 trillion. Outstanding debt on those properties is $8.6 trillion. In other words, 70.5 percent of the value of all homes is in debt. In five of the worst-off states, this relationship, known as the loan-to-value ratio, is 80 percent or more. In the case of Nevada, it is an unbelievable 114 percent. Negative equity in the state is more than $13 billion greater than total property value.

Of the 10 states with the highest percentage of mortgages with negative equity, nine have among the greatest declines in home value from the fourth quarter of 2006 to the fourth quarter of 2011. All of the top seven states with the largest housing price declines are on this list, including Nevada, where prices plummeted by nearly 60 percent during that time.

Local economic hardships usually coincide with falling home prices. For example, unemployment rates are exceptionally high in these states. Six of the states on our list have unemployment rates higher than the national average, including Nevada and California, which have the first and third highest rates in the country, respectively.

Many of the states with high negative equity also have a high percentage of homeowners on the brink of losing their investment. According to April data from CoreLogic, several of these states have among the highest percentage of homes that have been delinquent on their mortgage payments for 90 days or more. Three are in the top four, including Florida, where the rate was 16.8 percent in April.

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24/7 Wall St. reviewed CoreLogic’s Q1 2012 negative equity report to identify the states with the highest percentage of mortgages with negative equity. We measured this alongside a state’s total property value, mortgage debt outstanding and total home equity. We also looked at the percentage of homes with near negative equity, or homes with the value less than 5 percent more than the debt owed. Because of sample size, seven states were excluded from the results.

These states, which include Wyoming and Vermont, account for fewer than 5 percent of U.S.’ total population. In addition to CoreLogic’s data, 24/7 Wall St. reviewed a variety of additional metrics. We looked at May 2012 unemployment rates provided by the Bureau of Labor Statistics, and at median income, median home value and poverty rates from the U.S. Census Bureau for 2010. Declines in home value from the fourth quarter of 2006 through the fourth quarter of 2011 were provided by Fiserv. Fourth-quarter 2011 delinquency (90+ days) and foreclosure rates are from CoreLogic. Forecast changes in home value by state are from Fiserv.

These are the states with the most homes underwater:

1. Nevada

  •  Percent mortgages underwater: 61.2 percent
  •  Total property value: $93.39 billion (23rd lowest)
  •  Mortgage debt outstanding: $106.45 billion (21st highest)
  •  Percent mortgages 90+ days delinquent: 12.1 percent (2nd highest)

No state has been hit harder by the housing downturn than Nevada. Between the end of 2006 and the end of 2011, home values have tanked nearly 60 percent, higher than any other state by 7.2 percentage points. In 2011 alone, home prices fell another 9.4 percent. This has left many Nevadans owing significantly more on their homes than they are worth. The average loan-to-value ratio of a Nevada home is 114 percent, 25 percentage points higher than Arizona’s 89 percent (the second highest). In May, 24/7 Wall St. reported that 71 percent of mortgages in the state’s largest city, Las Vegas, were underwater, with values declining 63.2 percent from their peak. The state’s unemployment rate is 11.6 percent, the highest of any state in the U.S., making it that much harder for many Nevadans and dampening hopes of a quick recovery.

2. Florida

  •  Percent mortgages underwater: 45.1 percent
  •  Total property value: $777.34 billion (3rd highest)
  •  Mortgage debt outstanding: $684.97 billion (2nd highest)
  •  Percent mortgages 90+ days delinquent: 16.8 percent (the highest)

Home prices in Florida were nearly cut in half between 2006 and 2011. By the end of the first quarter, there were more than 1.9 million negative equity mortgages in the state with another 168,000 near delinquency. Homeowners in the state owe about $685 billion in mortgage payments, more than any other state except for California. Florida’s unemployment rate of 8.6 percent is above the national average of 8.2 percent, but it still could help it get out of the mortgage mess quicker than states such as California and Nevada, which have much higher unemployment rates.

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3. Arizona

  •  Percent mortgages underwater: 43.4 percent
  •  Total property value: $249.17 billion (17th highest)
  •  Mortgage debt outstanding: $221.71 billion (15th highest)
  •  Percent mortgages 90+ days delinquent: 5.8 percent (20th highest)

While states such as Arizona helped fuel economic growth in the mid-2000s with rising home values and new construction, the housing market began to hollow by 2007 and 2008. Case-Schiller predicts that home prices in Arizona will fall 9 percent in 2012, more than any other state. But other signs are pointing to an improving housing market, albeit modestly. When 24/7 Wall St. looked at underwater mortgages in March, 48.3 percent of Arizona’s mortgages were underwater, the second-highest rate in the country and nearly five percentage points higher than a quarter later. Meanwhile, total property value has risen a modest $6 billion between the fourth quarter 2011 and the first quarter of 2012, while outstanding debt has fallen by about $4.5 billion.

4. Georgia

  •  Percent mortgages underwater: 37.2 percent
  •  Total property value: $293.01 billion (15th highest)
  •  Mortgage debt outstanding: $246.52 billion (11th highest)
  •  Percent mortgages 90+ days delinquent: 7.2 percent (8th highest)

In 2011 alone, home prices fell by approximately 12.7 percent in Georgia, more than any other state in the country. Measured from the end of 2006, home prices have plunged nearly 35 percent, and are projected to fall an additional 4.2 percent in 2012. More than 7 percent of homeowners with a mortgage are 90 days or more delinquent on their payments as of April, the eighth-highest rate in the country. In all, total outstanding mortgage debt comes to $246.5 billion, the equivalent of 84.1 percent of the total property value in the state. This is the fourth highest loan-to-value ratio in the country.

5. Michigan

  •  Percent mortgages underwater: 35.6 percent
  •  Total property value: $193.15 billion (18th highest)
  •  Mortgage debt outstanding: $161.24 billion (18th highest)
  •  Percent mortgages 90+ days delinquent: 5.5 percent (24th lowest)

Despite more than one in three homes with negative equity, there are some positive signs in Michigan. The state was the only one on the list with rising home prices in 2011, with prices increasing a modest 1.7 percent. Meanwhile, Michigan’s unemployment rate of 8.5 percent ranked 12th in the U.S. in May. This is quite the improvement from the long period -- until June 2010 -- that Michigan held the dubious title of having the highest unemployment rate in the nation, topping out at more than 15 percent at the height of the recession.

Click here to read the rest of 24/7 Wall St.'s States with the most homes underwater.