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2011-03-09 16:51:14
1 in 5 Utah Mortgages are Underwater

More than 21 percent of Utah homeowners with a mortgage owed more than their homes were worth at the end of last year, the 12th-highest share of “underwater” homeowners nationwide, a new report shows.

Nationwide, more than 11 million households, or 23.1 percent of all mortgaged homes, were underwater in the October-December quarter, according to report released Tuesday by housing data firm CoreLogic. That’s up from 22.5 percent, or 10.8 million households, in the July-September quarter.

Although more than one in five homeowners in the Beehive State are facing negative equity, the rate is still far below some other Western states. In Nevada, 65.4 percent of homeowners with a mortgage had negative home equity, the highest share in the country, followed by Arizona (51.0 percent), Florida (47.3 percent), Michigan (36.2 percent) and California (31.8 percent).

Oklahoma had the smallest percentage in the October-December quarter, at about 6 percent. Only 10 states recorded percentages less than 10 percent.

Nationally, the number of Americans who owe more on their mortgages than their homes are worth prevent many people from selling their properties in an already weak housing market. The number of underwater mortgages had fallen in the previous three quarters, but that was mostly because more homes had fallen into foreclosure.

Underwater mortgages typically rise when home prices fall. Prices in December hit their lowest point since the housing bust began in 11 of 20 major U.S. metro areas. In a healthy housing market, about 5 percent of homeowners are underwater.

In addition to the more than 11 million households that are underwater, an additional 2.4 million homeowners are nearing that point.

When a mortgage is underwater, the homeowner often can’t qualify for mortgage refinancing and has little recourse but to continue making payments in hopes the property eventually regains its value.

The slide in home prices began stabilizing last year. But prices are expected to continue falling in many markets due to still-high levels of foreclosure and unemployment. That means homes purchased at the height of the real estate boom are unlikely to recover lost value for years.

Underwater mortgages also dampen home sales. Homeowners who might otherwise sell their home refuse to take a loss or can’t get the bank to agree to a short sale — when a lender lets a borrower sell their property for less than the amount owed on the mortgage.

 
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