If Deutsche Bank analysts are correct, nearly half of all mortgage holders will end up underwater: [Hat tip CPGone!]
Aug. 5 (Bloomberg) — Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said.
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, the securitization analysts said.
“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote.
The analysts believe that this will cause values to drop another 14% on average, but I suspect that is a conservative estimate for such massive losses. The bottom is still not in sight.
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I wonder if the term “housing recession” was not something carefully chosen. It’s like they’re planning ahead for December/early 2010.
“Why is my house price still dropping? The news said the recession was over!!”
‘Oh, no, sorry sir, that was the financial recession. This is the housing recession.’
“Oh. Well why did I just get laid off if the recession is over?”
‘No no.. we meant specifically the banking recession. Sorry for any confusion, although we at Goldman Sachs appreciate you sacrificing your tax dollars to keep us afloat.’
Entry level home prices in San Diego presently going up (read about it soon). If Roubini gets his wish and there is an across the board debt reduction, the game changes (of course we know other game changers are possible also). For the most part, interest rates, unemployment and wages will determine prices. What variables did Karen Weaver and Ying Shen use? Did they show their work?
Twist: News flash: Please, send this to John:
http://finance.yahoo.com/news/Nasdaq-BATS-to-stop-offering-apf-2556863229.html?x=0&sec=topStories&pos=3&asset=&ccode=
Seems that chasing Alice down the rabbit hole works!
Negative equity on a mortgage is not the best idea, why were such high levels of mortgages approved?
Chuck -
Thanks, I’m on it.
Hey amigos,
Don’t know if you saw the latest Fed scam to monetize debt using Wall Street banks as fronts, but I think this is huge.
http://www.zerohedge.com/article/feds-ust-pomo-pyramid-scheme-exposed?page=1