The Housing Chronicles Blog: Nearly 1 out of 6 homeowners now underwater on mortgages

Friday, October 10, 2008

Nearly 1 out of 6 homeowners now underwater on mortgages

With housing prices continuing to slide, the number of homeowners owing more than their homes are worth continues to rise, and now counts nearly 1 of 6 mortgages in this club. From the Wall Street Journal:

The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on a mortgage than the home is worth, raising the possibility of a rise in defaults -- the very misfortune that touched off the credit crisis last year...

And having more homeowners under water is likely to mean more eventual foreclosures, because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds the home's value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood.

About 75.5 million U.S. households own the homes they live in. After a housing slump that has pushed values down 30% in some areas, roughly 12 million households, or 16%, owe more than their homes are worth, according to Moody's

The comparable figures were roughly 4% under water in 2006 and 6% last year, says the firm's chief economist, Mark Zandi, who adds that "it is very possible that there will ultimately be more homeowners under water in this period than any time in our history."

Among people who bought within the past five years, it's worse: 29% are under water on their mortgages, according to an estimate by real-estate Web site

1 comment:

Unknown said...

Mortgages are a stressful topic right now. It's good to have as much information as possible at this point.