Worse Times Ahead for Housing

"[A]bout 25 percent of all U.S. mortgages are exceed the value of the homes the mortgages are financing. In the case of half the homes that are underwater, homeowners are paying a mortgage that's now 20 percent higher than the value of the home.

That's bad — but it's likely to get worse.

A recent report by First American Core Logic, a real-estate data firm in Santa Ana, Calif., estimated that as of Sept. 30, 7.5 million mortgages, or 18 percent of all properties with a mortgage, had negative equity. The group thinks there are another 2.1 million mortgages that are within 5 percent of going underwater.

If home prices fall another 10 to 15 percent...then four out of every 10 mortgages in the U.S. could be underwater. That means that for homeowners who owe 35 percent more than their homes' value, it would take, at historical averages, about 15 years just to break even on their home investment. They won't build equity. It would be a huge incentive for millions to hand the keys back to the lender and seek cheaper housing."