A New High In Negative Equity for Single Family Homes...

Recently, Zillow.com reported a new high in negative equity: 28.4% of single family homes with a mortgage (remember, 32% of all homeowners do not have a mortgage).

That's a national average, but the numbers are far worse in some of the nation's big metros. Atlanta, for example, has a 55.7% negative equity rate. Denver, 41%, Chicago nearly 46%.

"Higher rates of negative equity are creating a lot of latent vulnerability in the housing stock, where if the household then encounters some economic shock, like the loss of a job or divorce or death, then that household is much, much more likely to go into foreclosure," notes Zillow's Stan Humphries.

"So it just means that higher rates of negative equity, we’re going to see elevated rates of foreclosure for the next two to three years."

But higher rates of foreclosure put increasing pressure on home prices, causing them to fall further, which in turn puts even more borrowers underwater.

A vicious downward cycle where one begets the other, begets the other. 

"The best research that’s been done right now seems to suggest that negative equity impact on strategic defaults really kicks in at very high rates of value to loan ratio, so that means when people are more like 30-40% underwater does it start to create proactive behavior where they want to walk away from the mortgage. And even at those rates of loan to values, you’re still seeing strategic defaults be a relative…not a majority behavior," says Humphries.

"Home buyer confidence and demand are the only remedies right now for the housing/foreclosure crisis. Sadly, we have neither."