Deutsche Bank Estimates 48% of U.S Homeowners Underwater By 2011

Deutsche Bank Estimates 48% of U.S Homeowners Underwater By 2011

August 11^th, 2009

Karen Weaver, an analyst of Deutsche Bank published an alarming report indicating that 48% of American homeowners with mortgages will be underwater by first quarter of 2011.

Before looking into the details of Ms. Weaver’s report, let’s refresh ourselves with the details of the U.S. housing market.

Currently there are approximately 110 million households in the United States.
Approximately 75.5 million of these households are homeowners.
About 68% of the 75.5 million households or 51.6 million have mortgages.
27% of those mortgages which represents 14 million U.S. homeowners were underwater at the end of the 1^st quarter of 2009.
Deutsche Bank is forecasting that 48% of the 52 million mortgages will be underwater by first quarter of 2011.

Deutsche Bank conducted the report based on city-level projections of where house prices will bottom. DB made the forecast before the positive release of the Case Shiller numbers in July 2009 which was quite bullish on the housing recovery. If the Case Shiller numbers were too optimistic then the DB’s projection may seem too dramatic. However, if the Case Shiller numbers were too unrealistic, then DB may be right on the money.

This report is poised to cause a lot of controversy as to whether Deutsche Bank will be accurate in its findings for early 2011. We are still facing the inevitable unemployment problem and when there’s clear sight of it improving, then DB’s projection maybe a far cry.

VIEW DEUTSCHE BANK REPORT

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