WSJ reports nearly 1 in 4 homeowners are under water:
The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.
Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.
These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn’t expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.
The argument of oversupply is valid. But then, why would prices hit bottom in 2011, is it not rather likely that it will take many more years, if not decades to work through the overhang, coupled with continuously rising unemployment, government debt, and taxation, private deleveraging, increased savings, and declining consumption demand?
Keep in mind that things look even worse for borrowers in some of the bubble states:
Homeowners in Nevada, Arizona, Florida and California are more likely to be deeply under water, according to the analysis. In Nevada, for example, nearly 30% of borrowers owe 50% or more on their mortgage than their home is worth, said First American.
These, and more, are all reasons Why There Is More Pain to Come …