Underwater mortgages down, still total $690 BILLION

This report explains most if not all our current economic malaise.  I mean, if 24 percent of all homeowners are underwater on their mortgages to the sum of $691 billion (!), they're not going to feel secure enough to spend and stimulate the economy, or take the risk of opening their own business.  Their first priority is to pay off debt, and/or try to modify their mortgage with the bank -- a Kafkaesque nightmare that becomes like a second job.  

Sure, technically, many of these households are "saving," meaning they are paying down debt; however, this is not like savings invested in start-ups, stocks or bonds that drives long-term economic growth.

The Obama Administration has done almost nothing so far to help distressed borrowers.  Yet Republicans promise to do even less.  Indeed they reminded us in Tampa that they are the party of personal responsibility and hyper-individualism.  "Irresponsible" borrowers must "take their medicine" and learn a moral lesson from it -- that's what they deserve, that's what's fair, say Republicans.  Maybe so.  But it's definitely not what our country needs.  

So with Obama or with Romney, it won't make much difference, this thing is going to take years, if not a decade, to work itself out on its own without government intervention.  

The Number Of Underwater Mortgages Is On The Decline

By Mamta Badkar 

July 12, 2012 | Business Insider

11.4 million or 23.7 percent of all residential properties with a mortgage were in negative equity – when borrowers owe more on their mortgages than their property is worth – according to a new report by Corelogic.

This is down from 25.2 percent of all residential properties in the fourth quarter of last year. And lower than 24.7 percent in Q1 2011.

The negative equity share is at its lowest in nearly three years.

Here are some details from the report:

• Negative equity declined to $691 billion in the first quarter, from $742 billion in the fourth quarter.
• Over 700,000 households returned to positive equity in the first quarter.
• 2.3 million borrowers had less than 5 percent equity i.e. were in near-negative equity in the first quarter.
• Negative equity and near-negative equity mortgages accounted for 28.5 percent of all residential properties in Q1. This is down from 30.1 percent in Q4.
• Nevada had the highest negative equity percentage with 61 percent of all mortgaged properties underwater.
• The bulk of negative equity is focused on the low-end of the market. The negative equity for low-to-mid value homes (under $200,000) is at 31 percent of borrowers, nearly double the 15.9 percent for borrowers with home values over $200,000.

Decline in home values or an increase in mortgage debt cause an increase in negative equity. Negative equity improved in large part because of an improvement in home price levels.

"In the first quarter of 2012, rebounding home prices, a healthier balance of real estate supply and demand, and a slowing share of distressed sales activity helped to reduce the negative equity share," said Mark Fleming, chief economist for CoreLogic. "This is a meaningful improvement that is driven by quickly improving outlooks in some of the hardest hit markets."