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New Data on Underwater Borrowers


Dr. Stan Humphries, the Chief Economist at, recently released some data from the Zillow Negative Equity Report. Some of the data may be a bit unsurprising. For example, underwater homes are most common for borrowers who purchased during 2006 and 2007, when the real estate market was at its peak. 

Other data points were more interesting. For example, while younger borrowers are more likely to be underwater than older borrowers (many of whom likely took out their mortgages before the bubble), delinquent borrowers are more common in the middle-aged to older age brackets. For example, while 39% of borrowers aged 20 to 24 are underwater, only approximately 6% are 90 days past due on their mortgages. Contrast that with borrowers in the 85+ category. Roughly 15% of those borrowers are underwater, but 10.6% of them are delinquent.

The data also demonstrates that people who are underwater have a greater chance of being delinquent as the loan to value ratio increases. Quite simply, borrowers who are deeper underwater tend to have a higher rate of delinquency. 

So what does this mean for underwater homeowners? First and foremost, you're not alone. A significant chunk of our nation's homes remain underwater. Second, we haven't processed through all of the severly underwater homes that are at the highest risk for delinquency and foreclosure. This means that we can expect the housing market in hard-hit areas like Chicago to remain in flux for quite some time. 

If your home is significantly underwater, you may want to consider your options. While the market will eventually recover, many borrowers are a long way away from breaking even. Cutting loose a bad investment may be the best move for many people. If you're considering a strategic default, be sure to consult with a qualified attorney before simply walking away.