With reporting by Shirley Qiu.

Yesterday, KUOW's Deborah Wang reported that housing activists' estimate of the number of "underwater" mortgages in Seattle—mortgages where a home is worth less than the value of the loan—was wrong. 

Wang reported that a study released to the city council yesterday (our coverage here), which estimates that 42,000 Seattle mortgages are underwater, "was used repeatedly during yesterday’s testimony to indicate the severity of the foreclosure crisis in the city."

The KUOW report continues:

But, as it turns out, that number is wrong.  

The source is Zillow, the Seattle-based real estate website, which publishes a quarterly underwater mortgage report. The number quoted doesn’t refer to Seattle, but rather to the Seattle metro area, which includes King, Pierce and Snohomish counties.

Citing Zillow data for Seattle, Wang says that only about 17,000 city of Seattle homeowners are actually underwater—a far lower figure than the "crisis" level housing advocates cited at this week's city council hearing.

However, Saqib Bhatti, the union researcher who did the study on which many of the report's numbers were based, "The Wall Street Wrecking Ball," told PubliCola Wang's numbers are wrong.

Wang's language is certainly misleading—the 42,000 figure came not from Zillow but from a company called Catalist, which used a model to estimate foreclosures, and doesn't reflect numbers from all three counties. 

However, the study was misleading as well, and may have overstated the number of underwater homes in Seattle. 

First, the study claims that "Seattle has about 42,000 underwater mortgaged homes. That is over one third – about 33.5% – of Seattle’s mortgage total, a remarkable statistic." That 33.5 percent stat is based on Zillow data.

But the study leaves out this critical fact: That 33.5 percent figure is based on data from all three counties in the Seattle metro area. A far higher percentage of homes are underwater in Pierce and Snohomish Counties than in King County, which makes the 33.5 percent claim for Seattle—a claim city council members cited repeatedly in discussing the need for new city policies to address the mortgage crisis—especially misleading. 

Second, the flawed study also says that "turning now to Seattle in particular ... average negative equity on Seattle’s underwater homes is approximately $92,000." That number, too, refers to all three counties, not just the city of Seattle. 

Third, Catalist's 42,000 figure includes three ZIP codes that aren't in Seattle at all—98148, in Burien, 98155, in Lake Forest Park, and 98168, in Tukwila. And there are four that are only partically in Seattle: 98133, which includes part of Shoreline; 98146, which stretches into Burien; 98177, which includes part of Woodway; and 98178, which includes part of Renton.

While it's impossible to know how many of the underwater mortgages in the latter group of ZIP codes are actually in Seattle, the three out-of-town ZIP codes knock that 42,000 number back by more than 1,000.

And finally, if 42,000 Seattle mortgages really are underwater, that would be an absolutely stunning statistic. According to Zillow, there are about 100,000 mortgages in Seattle. So that would mean 42 percent of Seattle mortgages, not 33.5 percent, were underwater, putting Seattle among the likes of Florida and Las Vegas, two of the worst housing markets in the nation, in its percentage of underwater mortgages. That claim is a pretty hard sell at a time when real-estate reporters are touting our booming housing market.

Talking to PubliCola this week, Bhatti acknowledged that the 33.5 percent underwater stat and the $92,000 stat came from the three-county area, not Seattle, and said that's because statistics at the city level were not publicly available to him at the time of his report. However, neither his report nor the city report released yesterday makes that distinction clear.