Homeowners Hit Brick Wall, With Many Owing More Than Homes Are Worth

More than15 million American homeowners currently owe more on their mortgages than their homes are worth, up from 13.9 million in the previous three months. The numbers indicate that higher foreclosure rates could be on the horizon, a potential trend supported by a sobering report from real estate website Zillow.com that details 27 percent of homeowners are "underwater." That's up from 23.2 percent the previous quarter.

Economist David Blitzer with Standard & Poor's tells Fox News the new numbers need to be put in perspective. Blitzer says, "First of all, you may have somebody who's underwater, you know, they owe $200,000 on the mortgage and the house is only worth $198,000. Well, they're technically underwater."

That's not much he says but, on the other hand, "You may have somebody else who owes $200,000 and his house is $75,000 and he is really way, way underwater."

The areas most in need of a life preserver are Nevada, Arizona, California and Florida. Las Vegas takes the lead with more than 81% of all properties showing negative equity. Phoenix follows Sin City with nearly 70%; Reno, Nev., with almost 68% of homeowners underwater; Orlando, Fla., has 61.7%; and 58% of homeowners in Modesto, Calif., are drowning in negative equity.

Economists say home prices are declining as foreclosed properties sell at discounted rates and unemployment looms at nine percent, holding potential homeowners back. The drop in home values, at 2.6 percent, is the largest quarterly decline since the beginning of 2009.

While a boom in home values is expected later this year as the market recovers, there is a silver lining if you are in the market for a house. Blitzer says it is still a good time to buy. He adds that for those who are fearing the dreaded call from the bank, "My guess is most of them will not end up in foreclosure.

"These people will manage to make their mortgage payments, hold onto the house and, if home prices resume their long-term trend, which is to do a touch better than inflation, a lot of these underwater situations will turn out to be above water."

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