Nevada sees drop but still No. 1 for underwater homes

Nevada posted the second-biggest drop in homes with mortgages worth more than value in the second quarter, but the decline couldn't keep the state out of the top spot for such underwater homes.

California research firm RealtyTrac reported Wednesday that the share of seriously underwater homes — defined as homes on which the mortgage is at least 25 percent higher than market value — fell more than 7 percentage points in the second quarter, to 25 percent. That was down from 32.4 percent in the second quarter of 2014.

Only Rhode Island, with a drop of 14.2 percentage points, to 14.4 percent, saw a bigger decline.

Still, Nevada ranked No. 1 for negative equity, ahead of No. 2 Illinois, at 23.7 percent, and No. 3 Florida, at 23.6 percent.

Las Vegas placed No. 3 among metro areas, at 27.9 percent. Only Cleveland (28.2 percent) and Lakeland, Fla. (28.5 percent) ranked higher.

The national average fell to 13.3 percent, down from 17.2 percent a year earlier.

Nevada's negative equity rate peaked at 62 percent in the first quarter of 2012.

Annual appreciation gains of 25 percent to 30 percent in 2013 and 2014 slashed the local underwater rate, but price increases have slowed to around 10 percent a year, which means it will take awhile to further cut the number of seriously underwater homes.

RealtyTrac spokeswoman Ginny Walker said it could be a couple of years before the rate dips to the current national average. But that methodic improvement is actually better for the market, she said.

"The slower the rise in home prices, the healthier the economy will be," Walker said. "It's good for the market to be a little constrained and move a little slower than it has the last couple of years. You don't have to worry about whether we're in a bubble."

Walker also noted that 57.7 percent of Las Vegas homes in foreclosure were seriously underwater -- a "more alarming" statistic.

"They're the ones we have to watch," she said. "They're teetering on the edge, and they aren't going to be able to sell their home (and get out of default) until there's movement with home prices."

Contact Jennifer Robison at jrobison@reviewjournal.com. On Twitter: @_JRobison.