The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on a mortgage than the home is worth, raising the possibility of a rise in defaults -- the very misfortune that touched off the credit crisis last year.
The result of homeowners being "under water" is more pressure on an economy that is already in a downturn. No longer having equity in their homes makes people feel less rich and thus less inclined to shop at the mall.
And having more homeowners under water is likely to mean more eventual foreclosures, because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds the home's value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood
What is more interesting in this Wall Street article is the interactive historic affordability index. Almost every area has housing prices way to high for anyone to actually afford. The Northwest appears to be the worse with > 35% decline needed so people in the area can actually afford the houses to begin with.
For the people who bought in the last 5 years, the number in trouble is 29%.
What's wrong with this picture? Let's see they offshore outsourced the jobs plus created this ponzi scheme on shelter to jam up home prices which clearly the American people could not afford and it also appears they turned other people's homes into a glorified home equity ATM and now the middle class has also spent all of that money too trying to survive.