New Orleans The Wall Street Journal published a chart in Monday’s paper based on information from First American Home Core Logic, a real estate information service in Santa Ana, California in Orange County which was the heartland of the sub-prime industry.  The chart indicated that between 1 in 4 and 1 in 5 (22.6%) home mortgage holders are “underwater” on their homes with negative equity.  In simple terms these 10.7 Million homeowners now owe more money on their home than the home is currently worth.

In some states we are talking about a crisis of epic proportions.  In Florida almost half of the mortgage holders are underwater.  In California more than a third is in that predicament.  Those two states have about 4.5 million people in this pickle and that’s just under half of the total.  Both of those states have Republican governors, so one should expect that they will be blaming the Democratic Administration for not doing the job to relieve this crisis.

States where the problem is over the averages include:

Arizona                       44.9%

Georgia                       24%

Michigan                     37.3%

Nevada                        65%

So the hard statistical truth is that half-dozen states, and really more like five states, are really driving a huge amount of market deflation and most urgently need real propping up.  Actually, I should check, but I think Michigan may be the only one of those states with a Democratic governor, so it’s a surprise that we don’t hear about this all of time.  Or, maybe we will next election if these governors are so caught in defending the market’s right to push down values, that they are not creating support for homeowners desperate to hold on to their homes?

Are there any surprises on list?  Frankly, yes!

Illinois has over 18% under, and they are on few life support lists.  Utah is also over 18%, and I would have thought their numbers might have been lower.  Maryland and Virginia, which means the DC suburbs, where I have spent some time over recent months and where values were supposedly holding even though new construction had slowed, are both on a critical list with 21.5% and 23.8% of their homeowners underwater.

This continues to be problem without a plan.  Or at least a plan that works.  When you are talking about 10 million families in trouble and tempted to walk away from something that is worth less than they owe,  and many millions more on the bubble losing sleep with worry about this, I would say this is worth huge attention from the top down.

Hello?!?