When you've got negative equity in your house, you are screwed. When millions of home "owners" have negative equity, the entire country is screwed.
The Economist says 6.9% of mortgage holders have Less Than Zero equity. They're paying far more than it costs to rent, plus property taxes and insurance, for a house they can't dump because it will cost them money -- possibly tens of thousands of dollars -- to escape. It's even worse with recent borrowers: 18% of them are in negative equity and one in three new subprime mortgages are now expected to end in default.
With 1.3 million houses in foreclosure right now, default rates doubling by the year, double-digit property value declines in most formerly "hot" markets, millions of vacant houses and an expected 10% average drop in home value this year, America will go into a recession and possibly a Depression that will permanently drop the lower middle class to the ranks of the poor.
Oh, and 34% of mortgage holders don't even have any idea what kind of loan they have, so who knows how many additional millions of homes will be repossessed when these brainless creatures finally notice their mortgage payments have doubled and they can't afford it?
It's horrifying -- that's 25 million homes, or a third of the country's 75 million owner-occupied housing units. How many of these people did a Countrywide equity loan or re-fi and have no memory of doing it? We're talking about 70 million Americans who can't remember or never knew what kind of mortgage they've got.