Less Chicago Real Estate Underwater

November 30, 2011

Fewer metro Chicago real estate owners found themselves upside-down on their mortgages in the third quarter of this year.

According to CoreLogic, 383,625 Chicago-area homeowners owed more on their mortgages than their homes were worth at the end of September.

That accounts for 24.9 percent of all homes with a mortgage around Chicagoland; a steep number but also a decline from the 25.2 percent of underwater homeowners during this year’s second quarter.

house on a life preserverNationally, 10.7 million, or 22.1 percent of all U.S. residences with a mortgage, experienced negative equity last quarter, a slight decrease from the 10.9 million or 22.5 percent recorded at the end of the previous quarter.

An additional 2.4 million borrowers had less than 5 percent equity in their homes. When you combine those with negative equity and near-negative equity in the third quarter, it accounts for 27.1 percent of all U.S. homes.

Back here, the amount of Chicago-area homeowners who had less than 5 percent equity in their residences also declined slightly. During the second quarter of this year, 5.2 percent were near negative equity; in the third quarter, that number dropped to 5.1 percent.

And, despite record-low mortgage rates, nearly 22 million U.S. homeowners — which accounts for 45 percent of all borrowers — have mortgages with an 80 percent or more loan-to-value ratio, and 69 percent of those loans have above-market interest rates of 5 percent or more.

“Although slightly down, negative equity remains very high and renders many borrowers vulnerable when negative economic shocks occur, such as job loss or illness,” said Mark Fleming, chief economist with CoreLogic.

“The nearly $700 billion mortgage debt overhang has touched many corners of the market, and this overhang is holding back the recovery of the housing market and broader economy.”

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