Good article by Adam Weinstein, 8-6-2009
Are you a homeowner? Are you underwater in your mortgage? If not, just wait: You probably will be.
Two separate studies this week show an explosion in the number of single-family, owner-occupied homes that are now worth less than what’s owed on their mortgages. And one says that nearly half of U.S. homeowners will be in the same boat before the nation’s economic crisis recedes. This was from DS News “For many,” that report says, “the home has morphed from piggy bank to albatross.”
Equifax and Moody’s Economy.com estimate that falling home values left 16 million homeowners, about 24 percent of the nation’s total, with negative equity at the end of June. That’s six million more than this time last year.
A report by two Deutsche Bank analysts came up with similar figures, estimating that about 26% of U.S. homeowners were underwater. Even more ominously, they projected that 25 million homes overall – 48% of the market – will be worth less than the mortgage balance by early 2011, when they expect prices to stabilize.
“We project the next phase of the housing decline will have a far greater impact on prime borrowers,” Karen Weaver and Ying Shen wrote in the report.
That outlook conflicts with recent signs of a bottom and recovery in housing markets. As DS News reported this week, the Treasury department’s chief economist said increased home sales and lower inventories are “easing downward pressure on house prices,” and the recession’s “grip on the economy is easing.”
Instead, things still are likely to get worse before they get better, suggested Mark Zandi, the chief economist for Moody’s Economy.com.
“That such a high proportion of homeowners are underwater is testimony to the severity of the foreclosure crisis and the risk that it still poses to the broader economy,” he said.
