Story from Yahoo News. (H/T ECM)
Excerpt:
NEW YORK (Reuters) – The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.
[…]Covering 100 U.S. metropolitan areas, Deutsche Bank in June forecast home prices would fall 14 percent through the first quarter of 2011, for a total drop of 41.7 percent.
[…]Homeowners with the riskiest mortgages taken out during the housing boom have seen the greatest erosion in equity, in part because they were “affordability products” originated at the housing peak, Deutsche said. They include subprime loans, of which 69 percent will be underwater in 2011, up from 50 percent in March, Deutsche said,
Of option adjustable-rate mortgages — which cut payments by allowing principal balances to rise — 89 percent will be underwater in 2011, up from 77 percent, the report said.
Regions suffering the worst negative equity are areas in California, Florida, Arizona, Nevada, Ohio, Michigan, Illinois, Wisconsin, Massachusetts and West Virginia. Las Vegas and parts of Florida and California will see 90 percent or more of their loans underwater by 2011, it added.
Socialism destroys economic growth. There is no way around it.
WINTERY KNIGHT 
This is about as clear as mud… who can truly figure out economic shifts with great certainty? Our greatest economic minds have all had recent and huge failings in prognostacation.
…but it seems like the market is reacting favorably to the appearant failure of both cap and trade and the so-called public option health care push.
If those well and truly fail, and the market is indeed reacting to those, then they will only go up more. That will certainly help to stabilize home prices.
That said, what do our esteemed contributors think about the logical out come of that? Should anyone who’s home loan value exceeds their real home value move into default by default? I know that there’s a lot of hype around the popularity of “jingle mail” (mailing your keys to the bank and walking away from an upside down loan), including participation by Jose Conseco and a CA congresswoman who’s name escapes me right now. Is that the right band wagon to be on, or should people hold themselves accountable to their pledge to pay back the loans? Will being principled matter if there’s a total collapse?
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“Socialism destroys economic growth. There is no way around it.”
Wintery, seriously?
First of all, the largest drops in home prices occurred in the last year of Bush’s administration. Surely, he wasn’t a socialist, right?
And I agree with James, this is as clear as mud; and DeutscheBank doesn’t know the future – as they have demonstrated several times. In fact home prices rose on average in June and July:
http://www.clearcapital.com/company/MarketReport.cfm?month=August&year=2009
There’s no need for pessimism.
Finally, nothing Obama has done in his first 6 months is any more socialist than the US has been for a century. Is Medicare socialism? Is Social Security socialism? Is the interstate highway system socialism? If you seriously believe the US would be better off without those “socialist” programs, take a look at Haiti. They don’t have socialism, but they aren’t doing really well.
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Billy, have you examined any of the links between the Community Reinvestment Act in 1979, the creation of Fannie Mae and Freddie Mac, the legislation requiring the “loosening” of home loan requirements to the housing market collapse?
I just ask, because I haven’t seen anyone seriously propose that those aren’t right at the core of the housing market collapse, but Bush tried, in 2003, to get the regulations tighted up on those, and was shot down, and McCain tried in the senate in 2005.
I just ask, because you appear to be linking Bush to the home market drop and I’m not sure there’s any good reason to do that. If it’s just a “he’s in office” sort of thing, then wouldn’t it be just as valuable to point to the democratically controlled congress and senate?
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I think there were 3 causes:
1) The Community Reinvestment Act passed by the Democrats
2) The Federal Reserve cutting interest rates way too low for too long
3) Mortgage securitization
Bush actually tried to regulate Fannie Mae and Freddie Mac, but he was blocked by Barney Frank. I wrote about it here. And make sure you read the Roger Kimball piece I linked to because his article is even better than mine.
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