Home mortgages - upside down and underwater

from today's nyt...

Not since the Depression has a larger share of Americans owed more on their homes than they are worth. With the collapse of the housing boom, nearly 8.8 million homeowners, or 10.3 percent of the total, are underwater. That is more than double the percentage just a year ago, according to a new estimate of the damage by Moody’s Economy.com.

i was enormously relieved when my son and his wife re-financed their home a couple of years ago, switching from an arm to a fixed-rate mortgage... unfortunately, as part of that transaction, in which the value of the house was re-appraised at a significantly higher value than they bought it for, they took a chunk of the increased equity and used it to do some landscaping and home improvements... now, with housing prices falling and no bottom in sight, they, along with those nearly 8.8 million other homeowners, owe more on the house than it's currently worth... they would have been content to ride it out except that they're trying to get back to my daughter-in-law's home state, and just last week she had to turn down a job offer there because they simply can't afford to sell right now...

as the article goes on to say...

For Americans caught in a mortgage trap and owing more on a home than it would sell for, consumer spending and confidence are the most immediate casualties, [Richard T. Curtin, director of the Reuters/University of Michigan Surveys of Consumers] reports. But the damage goes deeper.

People cannot move easily to jobs in other cities if they have to sell their homes at a loss. The $168 billion federal stimulus package is likely to be less effective than intended because many homeowners may simply use their government checks to pay down their debts.

not a day goes by that i am not deeply grateful for my asset and debt-free life...

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