What is my house worth? Homeowners might find that their homes are worth less than they thought. A recent report from Deutsche Bank says that currently 27 percent of mortgage holders are underwater on the mortgage, but predicts that by 2011, almost 50 percent of mortgage holders, or one-third of homeowners will find that they owe more on their house than it is worth.
The report from Deutsche Bank, while it drops the scary bombshell that another 11 million people will go underwater on their mortgage by 2011, also analyzes some of the underlying causes to dropping home values and negative equity.
For much of the last decade, U.S. consumers took advantage of their rising home values by pulling out 25-30 percent of any increase in equity, according to the Deutsche Bank report, “Drowning in Debt — A Look at ‘Underwater’ Homeowners.”
Now that home values and home equity has fallen drastically, these homeowners that took advantage of their home values are looking at negative equity — where the borrower’s total debt obligations exceed the real estate market value price.
When you ask yourself, “What is my home worth?”, consider what type of loan you have. As with many of the problems facing the housing industry right now, homeowners with subprime and option ARMS might find themselves hit the hardest. The Deutsche Bank report predicts that while 48 percent of mortgage holders will be underwater on their mortgage in 2011, 68 percent of subprime borrowers and a staggering 89 percent of option ARM holders will that their debt exceeds their property value.
However, subprime loan holders aren’t the only one who could land in trouble with their home valuations. By 2011, 41 percent of conforming loan borrows will be underwater, up from 16 percent currently.