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These Are the Top 10 American Cities Sunk by Underwater Mortgages

Nationwide, one in four homeowners with a mortgage—11 million households — has an underwater mortgage.

Earlier this week, President Obama announced he would extend the mortgage refinancing program in an effort to provide relief to homeowners whose mortgages are worth more than the value of their homes. Nationwide, one in four homeowners with a mortgage—11 million households — has an underwater mortgage. The problem is even worse in some areas of the country.

Most of the cities on the list are in regions worst hit by the housing crash. These areas are all in California, Florida or the Southwest—all of which were booming housing markets before the recession hit. In the U.S., just fewer than 15 percent of homes were built in the last ten years. But in some of the cities on our list of highest underwater mortgages, that number is 25 percent and higher.

The high supply may have contributed to the sinking home values in those cities. In the case of Las Vegas, house prices have dropped by roughly 60 percent from peak pre-recession values, and they continue to drop to this day. In the cities with the most underwater mortgages, home prices have dropped by an average of 8.42 percent, and as much as 14 percent in the past 12 months.

To make matters worse, the employment situation in these metropolitan areas is in worse shape than in most of the country. This is partially the result of a once-booming construction industry that has since collapsed. Of the ten regions on this list, nine have an unemployment rate that is higher than the national average of 9.1 percent. Many of the regions have unemployment rates that are some of the worst in the country, such as Modesto and Stockton, California.

Using data obtained from housing data and analytics firm CoreLogic, 24/7 Wall St. identified the ten regions built around an urban center — core-based statistical areas — with housing markets that had the highest percent of homes with underwater mortgages. This data was compared to the number of sales of homes that had been repossessed, known as REO sales, and distressed sales (sales by homeowners who could not continue to make mortgage payments) for the same regions. Unemployment data was obtained from the Bureau of Labor Statistics. Data on homes built since 2000 was obtained from the U.S. Census Bureau.

These are the American cites sunk by underwater mortgages:

10. Bakersfield-Delano, California

Pct. homes underwater: 48.75 percent

12-month home price change: -9.58 percent

Homes built 2000 or later: 21.1 percent

Unemployment: 14.4 percent (tied for 11th highest)

Nearly 50 percent of the homes in the Bakersfield-Delano metropolitan area are currently underwater. In the past 12 months, homes have lost nearly 10 percent of their value, much more since the housing market first collapsed. Distressed sales have accounted for more than half of total sales in the past year, likely because of the difficult economic conditions in the region. To make matters that much more difficult, the area has an unemployment rate of 14.4 percent, the 11th highest in the country.

9. Lakeland-Winter Haven, Florida

Pct. homes underwater: 50.33 percent

12-month home price change: -4.59 percent

Homes built 2000 or later: 25.2 percent

Unemployment: 12.1 percent (30th highest)

The metropolitan area of Lakeland-Winter Haven is located in central Florida. Due in part to the development of retirement communities across the state, more than one in four standing homes have been built since 2000, compared to a national average of just 14.9 percent. Like most of the rest of the state, the region has been hit hard by the recession.

To date, more than half the area’s mortgages are underwater, over 21 percent of housing units are vacant, and a total of 35.06 percent of home sales in the past year have been distressed.

8. Port St. Lucie, Florida

Pct. homes underwater: 50.89 percent

12-month home price change: -4.68 percent

Homes built 2000 or later: 25.2 percent

Unemployment: 12.8 percent (22nd highest)

Nearly 18 percent of the homes sold in the Port St. Lucie region in the past 12 months have been properties that were originally foreclosed upon. Just about 35 percent of home sales in the past year have been distressed sales. The region has an unemployment rate of 12.8 percent, the 22nd highest in the country, and a median household income of $41,346, nearly $9,000 lower than the national average.

7. Vallejo-Fairfield, California

Pct. homes underwater: 53.29 percent

12-month home price change: -10.5 percent

Homes built 2000 or later: 14.1 percent

Unemployment: 11.6 percent (40th highest)

Despite the area’s exceptionally high median household income, the Vallejo-Fairfield metropolitan area’s housing market is suffering on all fronts. Home prices have dropped 10.5 percent in just 12 months. Just over 14 percent of homes in the area were built in 2000 or later. Additionally, 60.57 percent of total sales in the past 12 months have been distressed sales, the second greatest rate among metro areas on this list.

6. Modesto, California

Pct. homes underwater: 53.30 percent

12-month home price change: -9.22 percent

Homes built 2000 or later: 18.3 percent

Unemployment: 16 percent (6th highest)

In the past 12 months, home prices in Modesto have dropped more than 9 percent, one of the contributing causes of the 53.3 percent of the region’s mortgages to be underwater. As proof of the high level of foreclosures that has occurred in recent years, more than 40 percent of last year’s home sales were properties that had been foreclosed upon by a lender and resold. Of the 372 areas considered by the Bureau of Labor Statistics, Modesto has the 6th highest unemployment rate in the country. At 16 percent, it is nearly double the national average.

See the top 5 here.

(Michael B. Sauter, Charles B. Stockdale/Becket Adams—24/7 Wall St./The Blaze)

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