The Five States with the Worst Housing Problems
Life + Money

The Five States with the Worst Housing Problems

Foreclosure, Bankruptcy and Negative Equity Persist


It’s no surprise that many of the states that led last decade’s housing boom are the same ones now suffering the highest rates of foreclosure, bankruptcy and “negative equity,” or underwater mortgages.

Nationwide, one in every five mortgages is underwater, meaning that the mortgage is worth more than the house. The Obama administration announced today that as part of its plan to use $14 billion in TARP funds to help troubled homeowners, the Federal Housing Administration will refinance loans for vulnerable homeowners.

Who needs the most help?

Nevada: 69.9 percent under water
The gamble on Las Vegas didn’t pay off for most homeowners. Nevada was at the epicenter of the housing boom, with a 32 percent population increase between 2000 and 2009 and subsequent blitz of new construction. Last year, however, more people moved out of the state than moved in. The housing bust has left Sin City and the rest of the state with a stunning seven out of every ten mortgages worth more than the houses they helped pay for.

Arizona: 51.3 percent under  water
Who knew a desert could be under water? Phoenix alone expects to suffer up to 50,000 foreclosures this year, after home prices fell 50 percent since 2006. As late as early 2008, construction accounted for one in every ten jobs in the Phoenix area. When construction stalled, it caused a domino effect in other industries. Now, the unemployment rate is among the highest in the nation.

Florida:  47.8 percent under water
Things are looking gloomy in the Sunshine State these days. Like Nevada, more people left Florida in 2009 than came to it. Speculative real estate purchasing became a hallmark of the economy in many parts of the state during the boom years. Now, the sun has set on the idea that there’s a quick buck to made, or cold winter to be painlessly escaped, in the Florida housing market.

Michigan: 38.5 percent under water
In Michigan, the rust even hits the houses. The housing crisis here was caused less by speculative buying and lenient lending polices than by longstanding problems with the economy exacerbated by the recession, the auto crisis, and  manufacturing in general. Michigan currently has the highest unemployment rate in the country, at 14.1 percent. Even during the boom years in the early aughts, home prices in Michigan stagnated. Now, they’re in a nosedive.

California: 35.1 percent
Those looking for the California dream of year-round sunshine and easy living helped home prices increase 20 percent annually for much of the aughts. At one point, nearly 50 percent of the state’s jobs were related in some way to real estate. Unemployment has continued to increase through last month and now stands at 12.5 percent. A place with such a steep boom was doomed to feel the bust especially acutely: In addition to the high number of those under water, almost 6 million mortgages are currently in foreclosure.

Data provided by First American CoreLogic.

Blair Briody contributed additional reporting to this article.