Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

30% of mortgages are underwater

The foreclosure crisis heats up as more homeowners fall underwater on loans. By Les Christie, staff writer


NEW YORK (CNNMoney) -- Sometime, somehow, the foreclosure crisis will ease. But probably not anytime soon.

Home prices dropped 2.6% nationwide during the last three months of 2010, pushing more borrowers underwater, according to a quarterly real estate market survey from Zillow.com.

Now 27% of homeowners with mortgages owe more than their homes are worth. That's up from 23.2% a quarter earlier.

That will surely lead to higher foreclosure rates soon. That's because being underwater is second only to unaffordable payments in leading to foreclosure, according to Zillow's chief economist, Stan Humphries.

Additionally, the report found that more than one-third of all homes were sold at a loss in December. That trend has been on a steady uptick for the past six months, as homeowners try to find ways around foreclosure or out from under their homes.

The so-called "robo-signing" events of the fall also forced the number of underwater mortgages higher.

When banks' foreclosure paperwork came under scrutiny, many halted all repossessions until they could straighten things out. With foreclosures no longer being cleaned out of the system, more homes stayed underwater rather than moving on to foreclosure.

The moratoriums have been only temporary, however, and the defaults that had been stopped up in the foreclosure pipeline could come out in a gush over the next few months.

And any bump in the number of foreclosures adds to the likelihood that more homes will be dumped onto an already bloated market. That would just further depress home prices, continuing the vicious cycle that has plagued the industry for several years. To top of page


Overnight Avg Rate Latest Change Last Week
30 yr fixed3.36%3.43%
15 yr fixed2.65%2.69%
5/1 ARM2.87%2.93%
30 yr refi3.40%3.46%
15 yr refi2.69%2.73%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
  • Find Homes for sale
    Real estate and homes for sale on Trulia

  • Property Type
  • Find a home in: New York | Atlanta | Chicago | Los Angeles
  • Washington D.C | Houston | Philadelphia | More options
Index Last Change % Change
Dow 18,432.24 -24.11 -0.13%
Nasdaq 5,162.13 7.15 0.14%
S&P 500 2,173.60 3.54 0.16%
Treasuries 1.46 -0.05 -3.51%
Data as of 1:37pm ET
Company Price Change % Change
KeyCorp 11.70 0.05 0.43%
Bank of America Corp... 14.49 -0.19 -1.29%
Ford Motor Co 12.66 -0.05 -0.39%
General Electric Co 31.14 -0.11 -0.35%
Chesapeake Energy Co... 5.42 0.23 4.43%
Data as of Jul 29

Sections

For the first time ever, Amazon and Facebook are more valuable than Berkshire Hathaway, the storied company run by legendary investor Warren Buffett. More

Venezuela's government issues a decree recently that makes it possible to force workers to work in the country's fields amid food shortages. More

Sheryl Sandberg says she supports Hillary Clinton for president, because she would help close the gender gap, and because she's 'the most qualified candidate.' More

It's about to get harder for some luxury all-cash home buyers to hide their identity from the U.S. government. More