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Homes Below the 37th Parallel Most Likely to Have Underwater Mortgages
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Homes Below the 37th Parallel Most Likely to Have Underwater Mortgages

Today’s presence of underwater mortgages, or homes with negative equity, seem to be correlated to two common regional U.S. population trends: 1) domestic immigration from the Northeastern region to the South and Southwestern regions of the U.S., and 2) migration from coastal California inland.

During housing’s recent boom/bust years, an association has developed between slow growth-positive home equity markets and high growth-negative equity markets. Those markets that are well established and that have reached a stable population tend to be doing well when it comes to the home piggy bank. And those markets that have been a destination for millions of new homeowners have been left underwater. Generally speaking, the 37th parallel acts as the line of demarcation between the positive equity metros (north) and the negative equity metros (south). This parallel is located at approximately the border of Virginia and North Carolina or Utah and Arizona.

mortgage-map

[click to enlarge]

At the macro level, major housing factors causing migration from the Northeast to the Southern markets and Coastal California to the Inland markets include: 1) Housing Affordability – Northeast and Coastal California housing is typically more expensive than Southern/Inland housing. 2) Newer “Luxury” Housing – new developments offer homeowners more square footage, more luxury options and a more modern layout than older establish housing stock.

“In a way, the housing boom and subsequent bust is similar to the stock market boom and bust of the late 1990s,” notes Greg Fisher, Sr. Data Product Manager, Nielsen Claritas. “Just as unprofitable company stocks soared, new home markets soared without regard to real value. In other words, in many new home markets, the prices skyrocketed and became disconnected with the value of the land the homes physically sat on. Salary increases were far outpaced by home price increases, which was unsustainable. At the same time, established and profitable companies’ stocks endured slower growth and suffered far less damage when the market corrected, just as older housing markets are weathering today’s real estate downturn. These housing markets already had the fundamentals to protect against the worst of the housing bust – stronger incomes and more valuable land.”

What Do Severely Underwater Homeowners Look Like?

  • They earn $23,000 less than the U.S. average.

    • Severely Underwater Income: $35,000
    • U.S. Income: $58,000

  • Their homes are worth $113,000 less than the U.S. average.

    • Severely Underwater Home Value: $103,000
    • U.S. Home Value: $216,000

  • They have 58% less home equity than the U.S. average.

    • Severely Underwater Home Equity: -43%
    • U.S. Home Equity: 15%

  • Their mortgage balance is $7,000 higher than the U.S. average.

    • Severely Underwater Mortgage Balance: $187,000
    • U.S. Mortgage Balance: $180,000

  • They are located in areas where the home ownership rate is 25% lower than the U.S. average.

    • Severely Underwater Homeownership Rate: 46%
    • U.S. Homeownership Rate: 71%

  • They are 21% less likely to be located in areas where the prevalent house type has 1 or 2 units.

    • Severely Underwater 1 & 2 Unit Housing Rate: 52%
    • U.S. 1 & 2 Unit Housing Rate: 73%

  • They are 17% more likely to be located in areas where the prevalent house type is a multi-family unit.

    • Severely Underwater Multi-Family Unit Rate: 34%
    • U.S. Multi-Family Unit Rate: 17%

  • They are 2.3 years younger than the U.S. average.

    • Severely Underwater Householder Age: 47.9
    • U.S. Householder Age: 50.2

  • They have lived in their homes 2 years less than the U.S. average.

    • Severely Underwater Year Moved In:10.4 Years Ago
    • U.S. Year Moved In: 12.4 Years Ago