Report: More than half of mortgages in Washoe County underwater

More than half of Reno-area mortgages underwater

RENO, Nev. — The number of homes with upside-down mortgages in the Reno-Sparks area has declined, but industry experts said the seemingly good news is more likely due to higher default and foreclosure activity, as opposed to a rebounding housing market.

A recent report by CoreLogic showed more than half of the mortgaged homes in the area are still valued at less than borrowers owe on them, the Reno Gazette-Journal reported Monday.

The report estimates nearly 53,000 residential properties, or 55 percent, of homes with an active mortgage have negative equity. That’s down slightly from 56 percent in the first quarter of the year.

“Since we certainly aren’t seeing any price appreciation in Washoe County, I’d have to side with the theory that the slight drop in the number of underwater mortgages is tied to the increasing default and foreclosure rate,” said Brian Kaiser, an analyst with the University of Nevada Reno’s Center for Regional Studies.

“Once a loan defaults, it’s no longer counted in the underwater category. That certainly seems to be the case in the Reno-Sparks area where prices are trending down, but defaults are trending up.”

The analysis showed the percentage of near-negative-equity homes — a likely sign of foreclosure — increased during the first two quarters of the year, comprising 4,152 homes, or 4.3 percent of residential properties with an active mortgage.

Nevada continued to lead the nation for its share of homes with negative equity. Its negative equity rate of 68 percent significantly outpaced second-place Arizona’s rate of 50 percent. Rounding out the top five are Florida at 46 percent, Michigan at 38 percent and California at 33 percent.

In Washoe County, increased inventory could spell even more pain for the market in coming months, said Ken Wiseman, broker-owner of Reno Rancho Realty.

After hitting a low of 3,278 in January, the number of homes in the market shot up to 4,334 on Aug. 1. The all-time high for inventory was 4,701, which was set in July 2008. The number includes single-family homes, condos and manufactured homes.

“It just seems like we’re repeating ourselves again,” Wiseman said. “The federal government can’t keep propping up the industry. The only real solution is increased employment. It doesn’t matter if you have condos now priced as low as $23,000 or $30,000 if you don’t have the income to buy them.”

Information from: Reno Gazette-Journal, www.rgj.com