The 5 States With the Most Underwater Homeowners

CoreLogic, a company that provides financial and property analytics, released its “negative equity report” for the third quarter of 2010. Among other things, the data shows that the five states hardest hit by the foreclosure crisis hold some other dubious distinctions as well. They also have the most underwater homeowners.

Definition: An underwater homeowner is somebody who owes more on their mortgage loan than the home is currently worth. Thus they are underwater in the mortgage. This is also referred to as being upside down in the loan.

The envelope please. Cue the drum roll. And the five states with the highest percentage of underwater homeowners are:

  1. Nevada – In many ways, the Silver State could be considered Ground Zero for the foreclosure crisis. And it still shows. Today, 67 percent of all mortgage holders are underwater in their loans. Home prices in Las Vegas fell 4.2 percent in the third quarter alone.
  2. Arizona – Another of the so-called “sand states,” Arizona was equally devastated by the housing crisis. As of December 2010, 49 percent of the state’s mortgage-holding homeowners were underwater in their loans. An Arizona State University study recently showed that Phoenix is experiencing a double-dip in home prices.
  3. Florida – Things don’t look sunny for homeowners in the Sunshine State. Florida is close behind Arizona, with 46 percent of mortgage holders underwater at the end of 2010. Home prices in Florida are expected to decline by as much as 9 percent in 2011.
  4. Michigan – Approximately 38 percent of Michigan mortgage holders are underwater in their homes. Michigan is also a national “leader” in terms of unemployment. Last month, the state had one of the highest unemployment rates in the country (12.8 percent), second only to Arizona.
  5. California – The Golden State used to rank higher on this list. But the number of underwater homeowners there has dropped to 32 percent. The California Association of Realtors expects a 2-percent rise in the median home price in 2011. Of course, this is an organization that relies on homes sales, so we can take this forecast with a grain of salt.

At the national level, many analysts and economists are predicting further price declines for most of the U.S., well into 2011. In contrast, there are certain places where prices are expected to rise next year. But on the whole, the 2011 housing scene could look very similar to 2010.