Underwater Mortgages to Skyrocket by 2011 A new report by Deutsche Bank estimates that by 2011 nearly 50 percent of U.S. home owners with mortgages will owe more than their homes are worth.
This estimate of 25 million borrowers is significantly higher than similar calculations by other economic and real estate analysts. For instance, Moody’s Economy.com projected that 17.5 million will be underwater by early 2010.
Currently, about 26 percent of home owners choose to walk away from their mortgages because their equity falls short of what they owe, according to a report by Paola Sapienza, a finance professor with Northwestern University
Not everybody agrees with Deutsche Bank’s analysis.
Tom Lawler, a well-respected independent housing economist, wrote that given the recent increase in home sales in many areas, “there is absolutely no doubt that the DB ‘model’ forecast will show a huge miss to the down side on home prices.”
This seems a little too excessive to me. Personally, I highly doubt that home prices will continue to decline. In many areas they are already rising.