As home values continue to drop in the United States, one out of every five mortgage holders is now “underwater,” owing more money on their loans than their homes are worth. More than 8.3 million homeowners are in this troubling position, according to a new report out today from First American Core Logic.
The report estimates that 2 million more homeowners could go underwater if home values continue to drop another 5 percent.
In the fourth quarter of 2008, California had the highest number of borrowers with negative equity in their homes, with 1.9 million. Florida was second at 1.28 million. In terms of percentages, Nevada is in the worst shape with 55 percent of home owners underwater. Michigan came in second with 40 percent.
"The accelerating share of negative equity, combined with deteriorating economic conditions, means mortgage risk will continue to increase until home prices and the economy begin to stabilize," said Mark Fleming, First American CoreLogic's chief economist, in a statement.
The report comes as the White House announces the details of its Housing Assistance Plan, an attempt to stem the tide of foreclosures by allowing homeowners to modify or refinance their existing mortgages.
Other recent data reinforces the trend of plummeting home values. In December, the Case-Shiller Home Price Index showed that home prices dropped 18.5 percent nationwide from the same period in 2007. TransUnion reported that the number of people making late payments on their mortgages went up 53 percent in the fourth quarter compared to the prior year.
Major mortgage lenders have been extending efforts to help troubled homeowners. Citigroup (Stock Quote: C) recently announced a plan to assist out-of-work homeowners by lowering their monthly mortgage payments. JP Morgan (Stock quote: JPM), Wells Fargo (Stock Quote: WFC) and Bank of America (Stock Quote: BAC) along with Citi, have instituted a moratorium on foreclosures that will expire as the White House’s housing plan is put into effect.