Report: 55 percent of Nevada homes in foreclosure also heavily underwater

Sam Morris

House flipping was a hallmark of last decade’s real estate bubble, when investors, backed by easy money, bought homes and sold them for profit a short time later. Few places got as crazed with flipping as Las Vegas.

Being underwater on your mortgage doesn’t necessarily mean you’ll also lose your house to lenders.

But in Nevada, if you're on the path to foreclosure, you're probably underwater, too.

An estimated 55 percent of properties statewide in some stage of the foreclosure process also were heavily underwater in the first quarter, according to RealtyTrac.

That’s the highest rate in the country and far above the national average of 35 percent.

When a homeowner is underwater, their mortgage debt outweighs their home value. For the study, RealtyTrac picked borrowers who owed at least 25 percent more than their home’s estimated value.

Nevada leads the country in heavily upside-down borrowers, at 25.5 percent, compared with 13.2 percent nationally, the report said.

It also has one of the lowest rates of residents who have taken majority ownership of their homes, reflecting Nevadans’ heavy debt loads.

Some 13.3 percent of homeowners in Nevada are “equity rich,” meaning they hold at least a 50 percent equity stake in their home. Nationally, almost 20 percent of borrowers are equity rich, RealtyTrac said.

The five states with lower rates than Nevada are Mississippi, Indiana, Ohio, Illinois and Missouri.

Las Vegas became the underwater capital of America after the housing bubble burst, as residents valleywide were saddled with big loans on homes whose values had plunged from the bloated boom days.

An estimated 26 percent of Southern Nevada homeowners with mortgages were underwater in the fourth quarter last year, one of the highest rates in the country, according to housing-data firm Zillow.

That’s down from 35 percent a year earlier and far below its peak of 71 percent in the first quarter of 2012.

Nearly 149,000 homeowners in the valley have escaped upside-down status since then, according to Zillow, thanks largely to an investor-fueled boost in home values the past few years.

After the recession hit, investors started buying cheap homes in bulk in Las Vegas and other cities to turn into rentals. But faced with bigger prices they helped create and a crowded rental market for single-family homes, cash buyers have been backing out of the valley.

Real Estate

CORRECTION: This story has been updated to clarify the report's findings. | (May 8, 2015)