Half of all mortgages to be underwater by 2011

Posted Aug 6th 2009 12:00PM by Tom Johansmeyer
Filed under: Personal Finance, Housing, Recession, Financial Crisis

Deutsche Bank (NYSE: DB) expects almost half of all U.S. homeowners to be underwater -- figuratively, of course -- by 2011.

Declines in home prices and the fact that some of those difficult mortgages just aren't going away put 26% of homeowners in this situation by the end of last March, and it seems the situation is only going to get worse. Unlike the early stages of the credit crisis, which were driven by subprime mortgages, the next iteration will have a greater effect on prime mortgage borrowers, which comprise two-thirds of the loans outstanding.

The study forecasts that 41% of homeowners will sink to negative equity levels by the first quarter of 2011, a jump from 16% at the end of the first quarter of this year. Jumbo loans, which tend to be used for more expensive homes, will fare worse, with 46% underwater in 2011, a substantial increase from Q1 2009's 29%. Prime jumbos account for 13% of the overall mortgage market.

Arizona, California, Florida, Illinois, Massachusetts, Michigan, Nevada, Ohio, West Virginia, and Wisconsin are likely to be hit worst, with Las Vegas and some parts of California and Florida seeing 90% of mortgages hitting negative equity levels.

For adjustable-rate mortgages (ARMs), the situation could be far more severe. The study predicts that 89% will be underwater in 2011, up from 77% today.

Tags: adjustable rate mortgages, arizona, arms, california, financial crisis, florida, home prices, homeowners, housing bubble, housing market, housing sector, illinois, inthenews, jumbo mortgages, las vegas nevada, massachusetts, michigan, mortgage, mortgages, nevada, ohio, prime mortgage, recession, subprime loans, subprime mortgages, underwater, west virginia, wisconsin

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Reader Comments (Page 1 of 1)

8-06-2009 @ 12:53PM

ShaunneyCakes said...

WHO CARES!?!?!?!??!?!? You buy a house to live it, you do not buy it because it will or will not apprechiate in value. You use a house as a savings account for when you sell it, but if you invest 250,000 on a house that ends up being worth 200,000 when the mortgage is paid off... why does that matter!??!!??! During that same period you would have burned through 170,000-200,000 with no resale at all by renting. People need to start realizing about what is important and stop focusing on how they are NOT losing money...

People will buy a car KNOWING that they are just going to lose its value when they drive it off a lot, but someone who realizes their house is losing value will default on it... just does not make sense...