With the rise in foreclosures, there are a number of studies pointing to the fact that when a homeowner has negative equity (owes more on the home than it is worth), the chance of default increases. Earlier this week, a report from Deutsche Bank indicated that there may be a growing number of people across the US who will have negative equity by 2011.
Which doesn't bode well for foreclosure numbers.
"We project the next phase of the housing decline will have a far greater impact on prime borrowers," Deutsche analysts Karen Weaver and Ying Shen said in the report.
According to the Deutsche Bank report:
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.Justin McHood is a loan officer living in the Phoenix, Arizona area. You can find Justin on Facebook, Twitter, ActiveRain or LinkedIn and he is happy to answer any mortgage-related questions that you may have.
"For many, the home has morphed from piggy bank to albatross," the analysts said.