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Paul Kiesel
Paul Kiesel
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NYT: The Most "Underwater" Community in America

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The New York Times published an article today on a struggling California community, Mountain House, where 90% of homeowners owe more money on their mortgages than the their houses are worth: it has the highest concentration of underwater mortgages in the country.

In Mountain House, the average homeowner finds him or herself in about $122,000 of negative home equity. Granted, Mountain House is an extreme case of what’s taking place across the country, but if readers of this blog take note, these stories haven’t stopped: new ones are written weekly if not daily.

Therefore, when some analysts say, like Redfin CEO Glenn Kelman, that the housing market is close to bottoming out, at least in Los Angeles, and that home prices should stabilize or go up at some point in 2009, I’m a little dubious: we have yet to face the fallout from interest rate resets on pay option ARM loans from late-2006 and 2007. However, Mr. Kelman is less optimistic when it comes to other markets outside of California (markets he wouldn’t name), where he thinks 2009, for those unidentified markets, will be a lot like 2008 was for several California housing markets.

California had some of the more grossly inflated housing markets in the country, which led to the housing bubble and its subsequent loud burst, so naturally the state has had one of the hardest falls during the mortgage crisis. Nonetheless, what’s taking place in Mountain House, California is hard to imagine: almost the entire town has been swallowed by the mortgage crisis.

Click here for the New York Times story: "A Town Drowns in Debt as Home Values Plunge"