Top 10 Cities Underwater on Mortgages in Q3

by Alyssa Oursler | November 16, 2012 9:44 am

Housing PricesDespite some promising signs for a housing recovery, more than one in four homeowners still have underwater mortgages — where they owe more money than their house is worth.

The good news is that number is on the way down. In the third quarter, 28.2% of U.S. homeowners had negative equity, down slightly from 30.9% in the second quarter, according to data from the quarterly Zillow Negative Equity Report[1].

Additionally, all 30 of the nation’s largest metro areas covered by the report saw their negative equity rate fall quarter-over-quarter.

Still, as Zillow Chief Economist Stan Humphries put it: “While we’re moving in the right direction, a substantial number of homes are still locked up in negative equity, unable to enter the existing re-sale market despite the desires of their owner.”

Even after the quarterly drop, the percentage of underwater mortgages in some cities is still double the national average. Let’s take at the 10 worst cities with negative equity in Q3:

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10. Chicago

Homeowners with Negative Mortgages: 36.6%

In the third quarter, 36.6% of homeowners in Chicago had mortgages with negative equity, a slight improvement from the prior quarter prior when the percentage was near 40% but not enough to budge the city off the top 10 list.

Chicago is huge, and just over half of its houses are occupied by renters. Nearly 190,000 homes have a mortgage, while 20,500 have a second mortgage and nearly the same amount have home equity loans. The median household income for houses with a mortgage is decent at $77,411.

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9. Miami-Fort Lauderdale, Fla.

floridaHomeowners with Negative Mortgages:  41.4%

The story is much the same when we move down to Florida … just slightly worse. The area was obviously hit hard during the housing crisis, and even three years later, 41.4% of homeowners had underwater mortgages last quarter. That’s hardly better than the 43.7% the quarter before.

In fact, the whopping number of homeowners with negative equityis one reason Forbes cited for putting Miami in the No. 1 spot on its list of Most Miserable Cities[3] earlier in the year.

Ft. Lauderdale has just under 81,000 houses, while Miami has nearly twice that, with a total of almost 150,000. Miami has a large number of renters, with nearly 65% of occupants not owning the home they live in.

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8. Tampa, Fla.

florida houseHomeowners with Negative Mortgages:  43.2%

For the eighth spot, we’re still in sunny Florida. In the third quarter, 43.2% of homeowners in Tampa had mortgages with negative equity. That was around 3 percentage points better than in Q2, but not enough to change its eighth-place ranking.

Earlier in the year, a quarterly Consumer Distress Index listed the city as the most distressed major metro area. As The Tampa Bay Times put it[4]: “No other major metropolitan area is as stressed out as Tampa Bay when it comes to combined factors … most significantly, a lousy housing market.”

Tampa has 136,000 houses, with nearly 45,000 having mortgages. The median household income for houses with a mortgage is below $70,000.

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7. Sacramento, Calif.

california houseHomeowners with Negative Mortgages:  44.7%

Sacramento, Calif., was the sixth-worst city for underwater mortgages last quarter, but improved to seventh this quarter. The rate fell by nearly 5 percentage points, coming in at 44.7%.

Sacramento, like Miami, has a relatively large proportion of renters: half of the 155,000 occupied houses. The city has 54,000 housing units with a mortgage, while nearly 9,000 have a second mortgage.

The median household income for homeowners is $79,247.

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6. Detroit

#5: Detroit, Mich.Homeowners with Negative Mortgages:  45.2%

Detroit has obviously been struggling with high numbers of homes on the market and low housing prices since the Great Recession. And, relatively speaking, things aren’t getting much better. More than 45% of its homeowners are still saddled with negative mortgages, moving it up one spot on the list to sixth place.

Detroit has 375,000 houses, of which 336,000 are occupied and nearly 104,000 have mortgages. Around 45% of occupants — a common number in metro areas — are renters.

Given Detroit’s economic problems, the median household income for homeowners is unsurprisingly lower than most cities, coming in below $50,000.

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5. Phoenix

Arizona House in DisrepairHomeowners with Negative Mortgages: 45.5%

Phoenix might be in the top five for the worst cities, but least it’s one spot better than it was a quarter ago. In Q3, 45.5% of its homeowners had negative equities — a drop of 6 percentage points. That was the largest improvement posted by any metropolitan area on the full list.

Last year, two-thirds of all residential mortgages were underwater as the median home price was down 53% since the bubble peaked in 2006. In fact, many were calling the area “the epicenter of the housing crisis[5]” in 2011 — making its recent gains even more impressive, but also showing just how far Phoenix still has to go.

The Huffington Post [6]recently listed Phoenix as the second-fastest-growing city in America, with just under a 90% increase expected by 2042. Hopefully, the housing market can get back on track as the city grows.

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4. Riverside, Calif.

california houseHomeowners with Negative Mortgages:  47.3%

Since Phoenix moved out of the fourth spot, that left Riverside, Calif. — with 47.3% of homeowners holding underwater mortgages — to take is place. And that’s actually an improvement, considering that the number was over 50% last quarter.

But it’s still far from good.

Phoenix has 86,000 houses, with 82,000 occupied and only 43% rented. For houses with a mortgage, the median home price comes in at $79,830, while rent tends to be just over $1,000 per month on average.

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3. Orlando, Fla.

Homeowners with Negative Mortgages:  47.7%

We’re back to Florida for No. 3, and luckily, still under the 50% mark.

In the third quarter, 47.7% of homeowners in Orlando had mortgages with negative equity, a slight improvement from the prior quarter when the amount was 51.9% but not enough to move the city from the bronze medal on this list.

Again, this sunny city has a high percentage of renters — nearly 60%, which is the same as the statewide average. Orlando has 88,600 houses, but only 81,000 are occupied. The median household income for those with a mortgage is less than $70,000.

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2. Atlanta

georgia houseHomeowners with Negative Mortgages: 50.4%

Staying in the South, we have another city that didn’t move quarter-over-quarter. The reigning second-place city is none other than Atlanta, where just over half of all homeowners have negative equity. That’s pretty bad, but it’s around 3 percentage points better than it was in Q2.

Housing prices have been on their way back up of late, but the median price for vacant houses on the market is still barely over $200,000. Atlanta has 187,000 houses, and 168,000 of those are occupied — 56% by renters.

The median household income for houses with a mortgage is high, though: an impressive $92,324. But only about 45,000 homes of that 187,000 total have a mortgage.

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1. Las Vegas

nevada houseHomeowners with Negative Mortgages:  63.0%

They say what happens in Vegas, stays in Vegas. Unfortunately, what’s happened is that a huge number of homeowners are upside-down. In Q3, Las Vegas again took the underwater mortgage crown with its rate of 63% — better, at least, than the 68% in Q2.

Las Vegas has around 190,000 houses. While 77,000 of those units have a mortgage, 10,000 have a second mortgage, nearly 6,000 have a home equity loan and just under 200 have both.

The area also has the highest foreclosure rate in the country. Plus, Nevada is the only remaining state in which the total value of single-family homes was less than the total amount owed on them in Q2. In short, the entire state was underwater.

The bottom line: We still have a long way to go before we’ve swum out of this mess.

  1. Zillow Negative Equity Report:
  2. Compare Brokers:
  3. Most Miserable Cities:
  4. As The Tampa Bay Times put it:
  5. the epicenter of the housing crisis:
  6. The Huffington Post :

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