• Two-thirds of mortgages in Stockton in negative equity
• ‘Mortgage risk will continue to be very elevated’
The housing collapse in the Stockton area of the Central Valley is so profound that 66.56 percent of home mortgages are underwater – the term used when home value is less than the outstanding mortgage.
Nationally, more than 15.2 million U.S. mortgages, or 32.2 percent of all mortgaged properties, were in negative equity position as of June 30, according to newly released data from First American CoreLogic.
Negative equity and near negative equity mortgages combined account for nearly 38 percent of all residential properties with a mortgage nationwide.
In Stockton, 87,916, or 66.56 percent of all properties with a mortgage, are in negative equity. A total of 92,057 mortgages, or 69.69 percent, are in near negative equity or negative equity.
In Stockton, $17,657,052,032 total property value was at risk of default.
Negative equity, often referred to as “underwater” or “upside down,” means the borrower owes more on their mortgage than the home is worth. Near negative equity is when mortgages are within 5 percent of being in a negative equity position. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.
“Negative equity continues to be the dominant driver of the mortgage market because it leads to foreclosures in the event a borrower experiences some kind of economic shock: job loss, illness or other adverse situation,” says Mark Fleming, chief economist for First American CoreLogic.
“Given that negative equity did not increase this quarter and home price declines are moderating or flattening, it may indicate we are at the peak of the negative equity cycle. However, until negative equity recedes and unemployment declines, mortgage risk will continue to be very elevated,” he says.
