The homeownership rate could fall below 60 percent if homeowners who are deeply underwater end up losing their homes, a new report from mortgage data aggregator CoreLogic suggests.

Some 10.78 million homeowners were "underwater" during the third quarter, meaning they owed more on their mortgages than their homes were worth. About 22.5 percent of all homeowners with mortgages had negative equity.

That’s a slight decline from the 10.97 million homeowners who CoreLogic estimates were underwater in the second quarter, but the improvement was driven primarily by foreclosures rather than rising home values.

The homeownership rate could fall below 60 percent if homeowners who are deeply underwater end up losing their homes, a new report from mortgage data aggregator CoreLogic suggests.

Some 10.78 million homeowners were "underwater" during the third quarter, meaning they owed more on their mortgages than their homes were worth. About 22.5 percent of all homeowners with mortgages had negative equity.

That’s a slight decline from the 10.97 million homeowners who CoreLogic estimates were underwater in the second quarter, but the improvement was driven primarily by foreclosures rather than rising home values. 

So far this year, the ranks of underwater homeowners have thinned by about 500,000, CoreLogic said. But price declines in some markets could bring to an end or even reverse recent improvements in negative equity.

Many underwater homeowners will eventually lose their homes, and in the meantime may behave more like renters, failing to maintain their properties because they have no stake in them, the report noted. 

The official homeownership rate reported by the Census Bureau for the third quarter was 66.9 percent, down from a peak of 69.2 percent in the last three months of 2004.

But if homeowners who have mortgages that equal 125 percent or more of their home’s value are excluded from the calculation, the effective homeownership rate was actually 62.4 percent, CoreLogic said.

If all underwater homeowners are viewed as being more like renters than property owners, the effective homeownership rate is currently 56.6 percent, the report said.

Source: CoreLogic

Although CoreLogic’s "alternative definition" of homeownership won’t necessarily come to pass — many underwater homeowners are still able to make their mortgage payments and are not in imminent danger of losing their homes — it illustrates the magnitude of the negative-equity problem.

"Negative equity is a primary factor holding back the housing market and broader economy," said CoreLogic Chief Economist Mark Fleming in a statement. "The good news is that negative equity is slowly declining, but the bad news is that price declines are accelerating, which may put a stop to or reverse the recent improvement in negative equity."

Negative equity remains concentrated in five states: Nevada, where 67 percent of all mortgaged properties were underwater, followed by Arizona (49 percent), Florida (46 percent), Michigan (38 percent) and California (32 percent).

States where homeowners are in better shape include New York, where nearly half of borrowers have 50 percent or more positive equity, followed by Hawaii (43 percent), Massachusetts (40 percent), Connecticut (39 percent) and Rhode Island (40 percent).

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×