23% of Homeowners Underwater

"Green shoots" are blossoming left and right today. First came a comical 20% downward revision to preliminary GDP reports. Now we have a report from the WSJ that 23% of homeowners are underwater. But don't worry people, housing has hit a bottom...again.

The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.

Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.

Some interesting data points:

• Loan to Value ratio of 70% nationwide


• 65% of homeowners in Nevada underwater. Wow


• 4.9% of homeowners nationwide within 5% of underwater status

More delinquences coming

More than 40% of borrowers who took out a mortgage in 2006 -- when home prices peaked -- are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home's value.

Even recent bargain hunters have been hit: 11% of borrowers who took out mortgages in 2009 already owe more than their home's value.

With 11% of 2009 borrowers already underwater, isn't it time to challenge the assumption that current prices represent a "bargain"? First show me the jobs, then I'll show you a sustainable rebound in housing prices. The government can subsidize homeownership all they want, but all we will get is a new wave of borrowers who had no business owning a home in the first place.