From the Palm Beach Post:

No need to put a fright mask on these numbers: Nearly one in three Florida mortgage borrowers owed more on their loans than their homes were worth in the third quarter, according to a report issued Friday.

Fully 1.2 million of Florida’s 4.2 million mortgages — 29.2 percent — were upside down, said First American CoreLogic of Santa Ana, Calif.

If home prices dip another 5 percent, nearly 200,000 more Florida borrowers would slip under water. Further price declines seem a near certainty as foreclosures soar and job losses mount.

Moody’s Economy.com forecasts a 10 percent price decline in Palm Beach County, while Veros Real Estate Solutions predicts a 15 percent drop for Palm Beach County and the Treasure Coast in the coming year.

It all adds up to a gruesome picture. With so many homeowners under water and the job market weakening, foreclosures are likely to rise, said Sam Khater, senior economist at First American CoreLogic.

“There’s a large percentage of very vulnerable homeowners,” Khater said. “If they lose their job, if they run into some kind of health problem, or divorce, they might just walk away.”

Most homeowners will hunker down and continue to make mortgage payments in spite of the downturn, Khater said. But negative equity adds a toxic new ingredient to the housing market witches’ brew.

First American CoreLogic said more than 7.5 million properties nationwide have negative equity and an additional 2.1 million would likely follow should home prices decline another 5 percent.

New York had the lowest share of homes with negative equity at 7 percent, followed by Hawaii at 8 percent, Pennsylvania at 9 percent and Montana at 10 percent, according to the report.