Nearly One-Fifth Of Americans With Mortgage, Or 7.6 Million People, Owe More Than House Is Worth

October 31, 2008 1:11 p.m. EST

Washington, D.C. (AHN) - Nearly one-fifth of American homeowners with a mortgage - at least 7.6 million people - owe more than their house is worth, according to a report by a real estate research firm.

That is 18.3 percent of all mortgaged properties.

In other words, unless their mortgage holder agreed to allow the home-owner to sell the house for less than the mortgage and forgive the balance, in what is known as a short-sale, those homeowners would have to hand over money from their pockets, in addition to the amount the buyer paid them, just to be able to sell their house.

With the state of the economy as it is, few homeowners would have the extra cash to do so, which puts more homeowners at risk of going into foreclosure.

The term for owing more money on a mortgage than the house is worth is known as negative equity, but also referred to as being "upside down," or "underwater."

Along with the 7.6 million people who are already underwater, another 2.1 million people are treading water.

Those 2.1 million people have mortgages that are now less than 5 percent under the current value of the property, according to the report by First American CoreLogic. Which means a mere 5 percent, or less, decline in property values will raise the number of homeowners who owe more than their house is worth to a staggering 9.7 million.

The top 10 states for negative equity were:

• Nevada
• Michigan
• Florida
• Arizona
• California
• Georgia
• Ohio
• Colorado
• New Hampshire
• Texas

Negative equity share ranged from a high of 47.8 percent of mortgaged houses in Nevada to a low of 16.5 percent in Texas. Near negative equity share mortgages ranged from a high of 62.8 percent in Nevada to a low of 22.8 percent in Texas, according to First American CoreLogic researchers.

But the percentages don't tell the whole story. In terms of sheer numbers of troubled homeowner, California and Florida rank highest with an estimated 1.8 million and 1.2 million loans underwater respectively.

The states with the lowest rates of negative equity mortgages were New York 4.4 percent, Hawaii 5.6 percent, Pennsylvania 5.7 percent, Montana 6.9 percent, Connecticut 7.4 percent, Alabama 7.4 percent, Oregon 7.5 percent, Washington 7.6 percent, New Mexico 8.2 percent and New Jersey 9.3 percent.