...states with large numbers of homes with negative equity either had
rapid price appreciation, many homes bought with subprime mortgages or as
speculative investments, steep manufacturing declines, or a
Nevada was hardest hit, where mortgage borrowers on average owed 89
percent of what their homes were worth, and 48 percent had negative equity.
Michigan was second, with an 85 percent loan-to-value ratio and 39 percent of
David Wyss, chief economist at Standard & Poor's, predicts that home prices nationwide will fall another 10 percent before bottoming late next year, according to a Reuters article. He states, "Things seem to be stabilizing in Michigan, but the big bubble states—Florida, California, Arizona and Nevada—are still very overpriced." He also believes that though New York fared best in the report with only 4.4 percent of homeowners with negative equity, the state is still at risk the economy slows and leaves less money for housing.
Other experts go further by predicting the worst U.S. recession since the early 1980s. All 20 MSAs measured by the S&P/Case-Shiller Home Price Indices saw home prices decline between August 2007 and August 2008. In Q3 of 2008, foreclosures rose 71 percent to a record 765,558, according to RealtyTrac. The Commerce Department said the U.S. GDP fell at a 0.3 percent rate in Q3, according to Reuters.
Recent bank rescue plans have yet to spur lending and ease mortgage rates. This week, the rate on a 30-year fixed-rate mortgage jumped almost half a percentage point to 6.46 percent according to Freddie Mac. In addition, borrowing costs on adjustable-rate mortgages are expected to rise in the coming months. According to the Reuters article, "Last week, Wachovia Corp said borrowers with its "Pick-a-Pay" ARMs and living in or near Stockton and Merced, California, owed at least 55 percent more on their mortgages, on average, than their homes were worth."