Analysts: Many Are Underwater on Mortgages

More than 12 million U.S. homeowners are underwater on their mortgages, owing more than their homes are worth.

"When you're underwater and you have some kind of hit to your income or some kind of unintended expense, that's when you default. And so now we've got this noxious mix of millions of people under water and quickly rising unemployment," says Mark Zandi, chief economist at Moody's Economy.com.

Zandi calculates that there will be another 14.6 million homeowners under water by September 2009. Zandi and other economists believe this housing crisis will prove to be much more costly for the U.S. taxpayer than the $700 billion the U.S. government has already promised to recapitalize banks and buy up distressed debt from financial institutions.

"The government is going to have to start filling this negative equity hole and that's just going to be a direct cost to taxpayers," Zandi said. "This is going to be the really costly part, I think, for taxpayers."

Source: Reuters News, Tom Brown (10/21/2008)

This article is from Realtor Magazine Online Edition Daily Real Estate News for 10/22/08