Negative equity threatens homes

MCCLATCHY NEWSPAPERS

BOSTON — An estimated 25 million homeowners, or 48 percent of those with mortgages, will owe more on the loan than the house is worth by the first quarter of 2011, according to an analysis by Deutsche Bank released this week.

“For many, the home has morphed from piggy bank to albatross,” wrote analysts Karen Weaver and Ying Shen in a research report.

More and more strapped home- owners are finding that the amount they owe on the mortgage exceeds the house’s value as prices and sales continue to drop in many parts of the country. This situation is known as negative equity, or being underwater on the mortgage.

Deutsche Bank estimated that 14 million U.S. homeowners had negative equity at the end of the first quarter, or about 27 percent of owners with a mortgage.

Mark Zandi, chief economist at Moody’s Economy.com, said negative equity and foreclosures are the main threats to an economic recovery.