A new report released today is the first state-level study into negative equity single-family homes. The study found that 23% of Americans– nearly one in four– have mortgages where they owe more than their home is worth. According to a CNN news report about the study, almost 10.7 million mortgages were deemed “underwater” by the report as of the end of September.

The First American CoreLogic Negative Equity Report includes information on more than 45 million properties that have a first and/or second mortgage as of September 30, 2009. The study includes properties with values between $30,000 and $30 million. To determine how many homes are “underwater” First American CoreLogic subtracted the property’s current value from the remaining mortgage. If that was a negative number then that property is among the millions with negative equity.

There were millions of Americans who weren’t upside down in their mortgages, but were very close. About 2.3 million homeowners were within 5% of having negative equity. Some states were far higher than the national average of 23%:

Nevada: 65%
Arizona: 48%
Florida: 45%
Michigan: 37%
California: 35%

The reason these states have a much higher rate of negative equity mortgages, experts say, is because they have higher rates of prime loans that went bad including adjustable rate or interest only mortgages. The problem for many homeowners comes when the accumulated debt reaches 10-25% more than the principal loan amount. That’s when Adjustable Rate Mortgages are typically transferred into a fixed-rate mortgage, driving their monthly payments up significantly. At that point many homeowners aren’t able to make their monthly payments and are forced to consider foreclosure.

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