Nationally, 24 percent of residential properties with a mortgage were in "negative equity," up from 23 percent at the end of the third quarter, according to the fourth-quarter report released by First American CoreLogic this week.
Negative equity, also called being "underwater" or "upside down," occurs because of a decline in home value, an increase in mortgage debt, or both. It'll probably get worse before it gets better, said James Koch, an economist and president emeritus of Old Dominion University.
"This is not going to improve until the job market and the economy in Hampton Roads improves," Koch said. "The housing market in Hampton Roads very closely tracks employment numbers. Not only have those numbers gotten a little bit worse, the outlook for the future isn't especially good, either."
He points to the closures of International Paper in Isle of WightCounty and the discussion of moving an aircraft carrier to Mayport, Fla.
"Probably more individuals are going to find themselves below water and as a consequence, more individuals are going to walk away from their mortgages or declare bankruptcy." he said.
Nationally, negative equity is concentrated in Nevada, where 70 percent of mortgaged properties are underwater. Arizona follows at 51 percent, Florida at 48 percent, Michigan at 39 percent and California at 35 percent, the report said.
"Negative equity is a significant drag on both the housing market and on economic growth. It is driving foreclosures and decreasing mobility for millions of homeowners," said Mark Fleming, chief economist with First American CoreLogic. "Since we expect home prices to slightly increase during 2010, negative equity will remain the dominant issue in the housing and mortgage markets for some time to come."
For home buyers, negative equity is a good thing, because it means more homes will be available at lower prices, Koch said.
"If you're selling, it's not good news at all," he said. "It means there's a lot of inventory out there that's likely to come on the market that's likely to drive down prices."
Walking away from a mortgage, once taboo, is now more commonplace, Koch said. Even those who are able to pay are walking away if they're underwater, seeing it as a bad investment that will take years to regain.