Markets

Charting the Nation's Most Troubled Housing Markets

By Alain Sherter

Updated on: October 7, 2009 / 11:33 AM EDT / MoneyWatch

Which U.S. communities have been hit hardest by the real estate bust? Following is a list, courtesy of loan data specialist First American CoreLogic, of the top 25 metropolitan areas ranked by the percentage of residential housing mortgages with negative equity, meaning the value of the property is less than the amount of the loan (click on chart to expand).

Not surprisingly, California, Florida and Nevada, which have suffered the greatest price declines in real estate nationally, also lead the way in terms of cities with "upside down" mortgages. That in turn correlates with local job markets. Las Vegas, which leads the neg-equity hit parade, as of August had an unemployment rate of 13.4 percent, well above the national average of 9.8 percent. Total non-farm wage and salaries in the region are down 6.7 percent over the last 12 months.

Merced, Calif., No. 2 on the list, is in even worse shape, with an unemployment rate of 16.7 percent, although that's down from more than 20 percent in March. Housing markets in economically distressed Rust Belt cities, such as Flint, Mich., and Detroit are also suffering.

When home prices fall, unemployment soars and income declines, people fall behind on their mortgage loans. Not just poor folks. It's important to note how widely the subprime bust is affecting prime borrowers. That's particularly relevant for lenders because, for all the happy talk lately about the big banks, it underscores the scale of the problem across the industry.

Here are the top 10 metropolitan areas ranked by the percentage of mortgages defined as "seriously delinquent," meaning where homeowners are behind on their payments by at least 90 days or in foreclosure.

Miami, Fla., 22.1 percent seriously delinquent
Fort Myers-Cape Coral, Fla. (20 percent)
Merced, Calif. (18.9 percent)
Fort Lauderdale, Fla. (18.2 percent)
Fort Pierce-Port St. Lucie, Fla. (17.3 percent)
Orlando, Fla. (16.6 percent)
Stockton-Lodi, Calif. (16.2 percent)
Punta Gorda, Fla. (16 percent)
Naples, Fla. (15.5 percent)
Las Vegas, Nev. (15.5 percent)

Among prime borrowers, loans originated in the last two years have the highest delinquency rates. For 2007 loans, more than 12 percent of borrowers across the country are at least 60 days behind on their loans, compared with less than three percent for mortgages made in 2002-05, according to First American CoreLogic.

Where are things headed? Signs suggest the economy is starting to click back into a normal business cycle. Housing sales have risen in recent months, buoyed by the government's first-time buyers' credit. Manufacturers are starting to boost production. But there's still lots of slack in the economy, holding down wages. Unemployment is likely to remain elevated well into 2010, and perhaps longer, while as I've reported ad nauseum there's trouble ahead in commercial real estate. We're likely looking at a slow, tepid recovery.