Owners find themselves trapped underwater
Nearly 1 in 7 homeowners owe more on their mortgages than their homes are worth.
— -- Michael and Cynthia Russell wanted to move to New York City, where they both work. Jobs are more plentiful there than in their town of Poughkeepsie, N.Y. But like millions of Americans today, the couple are stuck. They owe about $80,000 more on the home they bought in 2004 than it is now worth.
So instead of selling their home, Cynthia is going to school to become a registered nurse and Michael is working from home.
"We have had to find opportunities closer to home," Michael Russell says. "We actually began trying to refinance in June 2007, but absolutely no one would take us."
It's a problem that's only expected to get worse for legions of homeowners across the USA. Nearly one in seven homeowners is underwater, owing more on their mortgages than their homes are worth. That's about 12 million homeowners, nearly double the number underwater at the end of 2007, according to Moody's Economy.com. Most are homeowners who bought between late 2003 and 2007.
Home prices are projected to drop on average another 10%, bringing to about 14.6 million the number of homeowners who will be underwater on their mortgages by fall 2009, says Mark Zandi, chief economist at Moody's Economy.com. By contrast, about 2.5 million homeowners had negative equity in their homes in 2006.
Increasingly, job seekers find that their homes are albatrosses imperiling their ability to relocate for higher incomes or more secure job opportunities. In fact, the greatest drop in home prices, in many cases, is in areas with the sharpest rise in unemployment.
"It's a pretty alarming trend," says Alan Steel, general manager of AOL Real Estate.
In California, about 18% of homeowners owe more on their first mortgages than their homes are worth. In Florida, it's nearly one in four. Half of homeowners in Louisiana are underwater on their first mortgages.
Paying on 'a lost cause'
Ken Schimpf, 61, a retired carpenter in Lancaster, Calif., briefly toyed with the idea of moving to Wyoming so he could be closer to his oldest son and live in an area where he could find work more easily. But he's trapped by his house.
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