[IWE] WSJ article on people "underwater" on mortgages.

[D. Scott Katzer]

http://online.wsj.com/article/SB122341352084512611.html#project%3DUnderwater0809 
(Flash Graph)

"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.

[...]

About 75.5 million U.S. households own the homes they live in. After a 
housing slump that has pushed values down 30% in some areas, roughly 12 
million households, or 16%, owe more than their homes are worth, 
according to Moody's Economy.com.

The comparable figures were roughly 4% under water in 2006 and 6% last 
year, says the firm's chief economist, Mark Zandi, who adds that "it is 
very possible that there will ultimately be more homeowners under water 
in this period than any time in our history."

[...]"

(Via http://calculatedrisk.blogspot.com/ )

McCain was right that something needs to be done about such mortgages 
(the $700B plan gives Paulson tools to address that, but it's not clear 
that he will).  But McCain's take on it was nothing but a gimmick. 
Several economists have proposed similar things (one I recall was that 
the USA should buy *every* mortgage, and rewrite them to 5% fixed 30 
year terms).  While it would put a floor under the market, it wouldn't 
help overheated areas like Las Vegas too much - homes that cost $500k 2 
years ago aren't suddenly going to be worth that again - prices have to 
come down because of the oversupply.  Ultimately, houses have to be 
affordable before things stabilize.  Wages haven't risen, so prices have 
to come down.

Cheers,
Scott.