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A Sinking Feeling: One-in-Five Homeowners Feels ‘Underwater’ on Mortgages

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family-web1RISMEDIA, March 21, 2009-The latest survey by the Pew Research Center for the People & the Press finds that 20% of all homeowners-or 30% of mortgage holders-say that if they had to sell their home right now, it would sell for less than they owe. And homeowners who feel underwater on their mortgages report considerably more financial strain that those who do not.

The survey, conducted Feb. 4-8 among 1,303 adults on cell phones and landlines, finds that mortgage holders who feel they are underwater are generally younger, less affluent and more likely to be Hispanic or African American than are those who feel they would at least break even if they had to sell today.

Roughly six-in 10 (61%) of those who say they are underwater on their mortgage are white, 12% are black and 18% are Hispanic. By comparison, 84% of mortgage holders who say their home would sell for at least the value of their mortgage are white, 6% are black and 6% are Hispanic.

Nearly a quarter (23%) of those who owe more than the current value of their home are under 30 years old, compared with just 10% of those who think they would at least break even if they had to sell today. Those who feel that they are underwater on their mortgage are also much more likely to have children under 18 living in the home than are mortgage holders who don’t feel that way (64% compared with 47%). Those who say their home is paid for tend to be older: 43% are 65 or older and 33% are ages 50 to 64. Consequently, relatively few (19%) say they have children younger than 18.

Roughly four-in-ten (41%) people who feel upside-down in their mortgages have annual household incomes under $50,000, while 31% earn $75,000 or more. By contrast, mortgage holders who do not feel upside-down have considerably higher household incomes (45% $75,000 or more). Homeowners who have no mortgage do not have particularly high incomes. Nearly half (47%) have household incomes of less than $50,000 while just 22% earn $75,000 or more.

Personal Finances

Overall, homeowners offer mixed ratings of their own personal finances. Nearly half (46%) say they are in excellent or good shape financially, and about the same number (52%) say they are in only fair or poor shape.

Among those who feel that their home would now sell for less than they owe on their mortgage, however, ratings of personal finances are considerably less positive. More than six-in-ten (63%) offer a negative assessment of their personal financial situation, while only 36% say they are in excellent or good shape. In contrast, a majority (54%) of mortgage holders who feel they would at least break even if they had to sell today say they are in excellent or good financial shape.

These negative ratings from people who feel their mortgages exceed the value of their homes are reflected in some of the experiences they have had in the past year. Mortgage holders who think they are underwater are far more likely than those who do not think so to have had problems paying their mortgage over the past year (33% vs. 10%), to have had a mortgage or credit application denied (28% vs. 8%) and to have had problems with collection or credit agencies (27% vs. 8%).

Mortgage holders who are underwater also are more likely to be suffering financially in other ways. They are more likely to have had trouble getting or paying for healthcare for themselves or their family (32% vs. 16% of those who are not underwater) and to report having been laid off (21% vs. 13%).

Homeowners and Recent Financial Cutbacks

Nearly all (98%) of those who say their home would sell for less than they owe on their mortgage report having made reductions in spending or changes in their saving or investment patterns lately, as do most (86%) of those who say their homes would sell for more than the value of their mortgage. However, on any given cutback item- outside of adjusting retirement plans- those who are upside-down on their mortgages are at least 15 points more likely than those who are not to report cutting back. For example, 63% of mortgage holders who say they owe more than the value of their home report having delayed or canceled plans to make a major purchase for their household, compared with just 38% of those who do not owe more than the value of their home.

Top Concern is Jobs, Not Real Estate Values

Although a substantial minority (19%) of those who feel underwater on their mortgages cite declining real estate values as their top personal financial worry, this concern runs a distant second to worries about the job situation. Nearly half — 47% — of those who feel upside-down cite jobs as their top concern.

While a plurality of mortgage holders who do not feel upside-down also mention jobs (38%), the second most cited concern among this group is problems in the financial markets (30%); only 11% of mortgage holders who are not underwater say their biggest concern is declining real estate values.

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