The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.
As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges.
Seven markets in states with the fastest appreciation during the five-year housing boom -- including Fort Lauderdale and Miami, Florida; Merced and Modesto, California; and Las Vegas -- may find 90 percent of borrowers underwater, according to the report.
The share of borrowers owing more than 125 percent of their property’s value will increase to 28 percent from 13 percent.
Home prices will decline another 14 percent on average, the analysts wrote.
I don't know whether this will turn out to be true or not but the trends don't look promising. Prices are still falling and talk of stabilization seems premature to me. More "green shoots". But my point is that housing itself has never been a great "investment" according to the data and one should not lump it in to that category for planning purposes. It provides shelter, maybe other psychological benefits, but little in the way of real appreciation. See my prior posts on this topic for additional proof.
The bright side is that the quantity of credit card and home re-financing junk mail pieces, both hard copy and email, has declined at a similar rate. Spouse of Oracle.
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