Nearly 50 Percent of U.S. Homeowners with a Mortgage will be Underwater in 2011

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According to Deutsche Bank’s research, nearly 50 percent of American homeowners with a mortgage will be underwater by 2011. Pretty scary stuff considering 66% of American’s (or 51.6 million people) have a mortgage on their home.

And you would think we would have this problem solved considering the stock market is up 50% from the March 6th lows. Right?

Couple highlights I take from lead researcher’s interview:

Around 27% of homeowners are currently underwater on their mortgage as of 2009. (A 10% increase from December 2008.)
Prime borrowers upside down on their mortgage will increase from the current 16% to 41% by 2011. A 156% increase in just two years time.
It’s estimated that housing prices could fall another 15% from current real estate prices. Not surprising when you consider the how much housing prices spiked above the mean.
More government intervention could be required to expedite mortgage refinancing and combat the negative equity issue.

If only someone could have written a post about how to spot a real estate bubble five years ago or discussed the scaled up consequences of large numbers of people living outside their means.

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Posted by Matt SF @ 6 August 2009 2 comments

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Aug 6, 2009
10:50 pm

#1 MoneyEnergy :

Yep, yep. Of course “freaks” like Peter Schiff were already talking about that, but people don’t like to listen to negativity if it’s about the future and they think it won’t happen to them… I’ve heard from a number of analysts now that the “prime” borrowers are the next mortgage sector to start going under. Good reason to get investing outside the U.S. for more diversification.

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Aug 6, 2009
11:07 pm

#2 Matt :

Yeah, prime borrowers are supposedly the next group to tumble. It’s not hard to believe it when you consider that companies are still downsizing and lots of folks are just two paychecks away from financial ruin.

I don’t know if I would be heading outside the U.S. any more than normal exposure to global markets. Not an expert there.

Strangely enough, I’ve been considering doing some vulture investing in the southeastern U.S. condo market. This post might put a hold on that unless I get an exceptional deal.

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