Tag: housing

Millionaires More Likely to Strategic Default

Filed in BP, CBS, Gold, GOld juniors, Gold Market, housing-market, Lear, o by on February 8, 2011 0 Comments
Millionaires More Likely to Strategic Default

Not surprisingly, the bursting of the housing bubble has moved up to the final rung on the ladder. Far from the days of the subprime debacle, now even the “good” people are getting squeezed. The difference is the rich are smart enough to walk away from it all. In fact, homeowners with loans of more than $1 million default at a much higher rate than “the little people” do. From CBS News entitled: Even More Millionaires Defaulting on Mortgage “ For Darren Thomas that ocean view was quickly losing its value. He says, “I bought it for [$1.385 million]. It is worth less than [$800,000], maybe less.” Thomas bought his townhome in 2006 but after seeing its value drop steadily he stopped paying. “I haven’t made a payment in two years,” he says. “It was business decision. It was an easy decision. I have a property worth six or 700,000 less than when I bought it. I was making payments of 10,000 a month.” Thomas has gone into strategic default. He could make payments but is refusing to put more money into a home that is worth less than his mortgage. Among luxury homeowners he is not alone. One in seven homeowners with loans over $1 million are seriously delinquent compared to one in 12 with mortgages below $1 million. The more you owe, it seems, the better off you may be. Darren Thomas continues to live in his home because banks are often slower to foreclose on million-dollar homes. For those who have stopped paying their million-dollar mortgages it’s just an investment that didn’t work out. “As negative equity took place and drove the value down it became an investment not worth holding onto,” says Corelogic’s Mark Flemming. “Not much different than a regular stock you would sell.” “People like myself, business people, are going it is silly to throw good money after bad,” says Thomas “The loss is not mine. The loss is the banks.” When it comes to real estate, the rich are different. They can be just as ruthless as the bankers.” I guess Nick Carraway was wrong after all. In some ways the rich really are just like the rest of us….suckers for a good bubble. The difference is they understand the money/business part of the game better than most. For them its just a business decision. By the way, according to CoreLogic, home price have fallen for the fifth straight month. Overall, house prices delined 1.8% for the month of December. Related Articles: Case-Shiller Index Shows Renewed Home Price Declines 2011 Housing Market Forecast Case-Shiller Index Screams Housing Double Dip Meredith Whitney Predicts a Housing Double-Dip Zandi: Expect 8% Home Price Declines To learn more about Wealth Daily click here Millionaires More Likely to Strategic Default originally appeared in Wealth Daily . Wealth Daily is a free daily newsletter featuring contrarian investment insights and commentary.

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China’s Housing Bubble Begins to Top

Filed in BP, citigroup, economy, Gold, GOld juniors, Gold Market, housing-market, Lear, o, target by on February 1, 2011 0 Comments
China’s Housing Bubble Begins to Top

Round and round she goes, where she stops nobody knows…. From Bloomberg entitled: China’s Housing Market Nears U.S., Japan Bubble Levels: Chart of the Day “ China’s property market may be heading into a bubble as the economy’s reliance on real estate reaches a level close to the housing peaks in the U.S. and Japan, according to Citigroup Inc. The CHART OF THE DAY shows investment in residential property accounted for 6.1 percent of China’s gross domestic product last year, the same level as the record in the U.S. in 2005 that was followed by the subprime crisis, said Shen Minggao, Citigroup’s China research head. It’s also about 2 percentage points away from Japan’s 1970s housing boom, he said. “ China’s property market is entering into a bubble stage,” Shen said in a phone interview. “It’s evident that property prices are no longer sustainable once the residential investments achieve above 8 percent of nominal GDP, and China may not be an exception.” A 10 percent drop in China’s property investment translates to a 1 percentage point decline in nominal GDP, Shen said. Adding investments indirectly related to the real estate industry, nominal GDP will fall 2 percentage points to 2.5 percentage points, he said China’s property prices rose for 19th month in December, climbing 6.4 percent from a year earlier. The government last week increased the minimum down-payment for second

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NEWSFLASH: The Meltdown Didn’t Have to Happen

Filed in Alan Greenspan, BP, democrats, Federal Reserve, Gold, Gold Market, lead, Lear, o, Yahoo by on January 28, 2011 0 Comments
NEWSFLASH: The Meltdown Didn’t Have to Happen

Watching the government do practically anything is often akin to watching molasses run down the hill in January. But like that slow running ooze, even the government eventually manages to accomplish its feat. The problem in this case is that they are telling us what we already know. So here’s the newsflash sportfans: the financial meltdown could have been stopped. Gee thanks… From the New York Times by Sewell Chan entitled: Financial Meltdow was ‘Avoidable’, Inquiry Concludes “ The 2008 financial crisis was an “avoidable” disaster caused by widespread failures in government regulation, corporate mismanagement and heedless risk-taking by Wall Street, according to the conclusions of a Congressional inquiry. The government commission that investigated the financial crisis casts a wide net of blame, faulting two administrations, the Federal Reserve and other regulators for permitting a calamitous concoction: shoddy mortgage lending, the excessive packaging and sale of loans to investors, and risky bets on securities backed by the loans. “ The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done,” the panel wrote in the report’s conclusions. “If we accept this notion, it will happen again.” The commission’s report finds fault with two Fed chairmen: Alan Greenspan, a skeptic of regulation who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but then played a crucial role in the response to it. It criticizes Mr. Greenspan for advocating financial deregulation and cites a “pivotal failure to stem the flow of toxic mortgages” under his leadership as “the prime example” of government negligence. It also criticizes the Bush administration’s “inconsistent response” to the crisis — allowing Lehman Brothers to go bankrupt in September 2008 after earlier bailing out another bank, Bear Stearns, with help from the…

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Case-Shiller Index Shows Renewed Home Price Declines

Filed in BP, Gold, Gold Market, housing-market, Lear, o by on January 25, 2011 0 Comments
Case-Shiller Index Shows Renewed Home Price Declines

This one is no real surprise since the double dip in home prices is accelerating…. From Bloomberg by Shobhana Chandra entitled: Home Prices in Us. Declined 1.6% From Year Earlie “ Residential real-estate prices dropped in November by the most in a year, signaling housing has yet to join the U.S. rebound. The S&P/Case-Shiller index of home values in 20 cities fell 1.6 percent from November the prior year, the biggest 12-month decrease since December 2009, the group said today in New York. The decline matched the median forecast of economists surveyed by Bloomberg News. “ The housing market is in a state of hibernation,” said Zach Pandl , an economist at Nomura Securities International Inc. in New York. “We have a very severe foreclosure problem. Prices are going to keep weakening this year. Weakness in the housing market is likely to keep the Fed relatively cautious in its statement tomorrow.” The Case-Shiller gauge is based on a three-month average, which means the November data was influenced by transactions in October and September. Sixteen of the 20 cities in the index showed a year-over- year decline, led by a 7.9 percent drop in Atlanta. In November, prices in eight markets dropped to fresh lows from their 2006, 2007 peaks. “ With these numbers more analysts will be calling for a double-dip in home prices ,” David Blitzer , chairman of the index committee at S&P, said in a statement. A double-dip would be reached when the 20-city index sets a new post-peak low, which may happen in the first half of this year, said Blitzer. Industry projections reinforce the concern about housing. The number of homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, said RealtyTrac Inc., an Irvine, California-based data seller. Home values may drop as much as 11 percent through the first quarter of 2012, which would put them 36 percent below their 2006 peak, according to a Dec. 8 Morgan Stanley report.” From the looks of this report, it is shaping up to be another tough Spring. Related Articles: 2011 Housing Market Forecast Case-Shiller Index Screams Housing Double Dip Meredith Whitney Predicts a Housing Double-Dip Zandi: Expect 8% Home Price Declines To learn more about Wealth Daily click here Advertisement “R-4 Trigger” Predicts Which Options Will Jump 68% or More After three full years of beta testing (and cumulative returns of 10,805%), the “R-4 Trigger” is ready for public release… Which means, just 27 days from now, you could be sitting on easy 68% gains. Click here to learn more. Case-Shiller Index Shows Renewed Home Price Declines originally appeared in Wealth Daily . Wealth Daily is a free daily newsletter featuring contrarian investment insights and commentary.

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Weekend: A Digital Pearl Harbor

Welcome to the Wealth Daily Weekend Edition— our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles. From Sun Tzu to “Stormin’ Norman” Schwarzkopf, the goal of every military commander has always been pretty simple: to kill people and break things. Beat the other guy, and your name will find its way into the history books… The only thing that changes is the technology. From the longbow to the ballistic missile, the arms race is one that never sleeps. One of the fastest growing fronts in this struggle is in cyberspace. Today’s style of combat is geek versus geek. But don’t believe for a second that it’s not just as dangerous… Because while it doesn’t involve tanks or fighter squadrons, cyberwar’s ability to disrupt an enemy is just as effective, and often equally destructive. It’s war by other means — one that focuses on using computer code to strike an enemy’s Achilles’ heel. Full-scale cyberwar The recent discovery of a computer worm called Stuxnet is a perfect example of the damage a hacker armed with code can create. Using the “most advanced and aggressive malware in history,” cyberwarriors have now set Iran’s nuclear ambitions back by two years, according to most estimates. (Not surprisingly, Israel and the United States are at the top of the suspect list.) The worm itself attacked controllers critical to operations at Natanz, a sprawling enrichment site in Iran’s desert. As operators stared blankly at their screens, the bug’s centrifuges spun wildly out of control, tearing systems apart. “This was nearly as effective as a military strike, but even better since there are no fatalities and no full-blown war. From a military perspective, this was a huge success,” said Ralph Langer, a top German Security expert. “It will take two years for Iran to get back on track.” This is only the latest cyber skirmish… Back in 2007, Estonia fell victim to what Wired Magazine dubbed “Web War One”. Hounded by three weeks of digital assaults, Estonia’s electronic Maginot Line proved as feeble as the original. The country’s firewalls withered as a flood of data sent by the nation’s unknown opponents quickly crashed one system after another, crippling numerous vital public services. Websites of government ministries, banks, and newspapers all fell victim. And while the rest of the world watched the attacks with a combination of curiosity and indifference, military planners…

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MGIC (MTG): Mortgage Turnaround?

Filed in Bank Gold, earnings, lead, o, recession by on January 19, 2011 1 Comment
MGIC (MTG): Mortgage Turnaround?

Filed under: Newsletters , Stocks to Buy , Housing , Recession “MGIC ( MTG ) is the leading U.S. private mortgage insurer; in fact, the company claims to have founded the mortgage insurance industry in 1957,” notes turnaround specialist George Putnam . The editor of The Turnaround Letter explains, “After many years of relatively steady earnings, MGIC was forced to sharply increase its reserves beginning in 2007 as more homeowners began defaulting on their mortgages. “As a result, the company posted large losses in each of the last three years, which reduced its capital to a precarious level. Almost all of the other mortgage insurers suffered similar fates, with several competitors being forced out of business. Continue reading MGIC (MTG): Mortgage Turnaround? MGIC (MTG): Mortgage Turnaround? originally appeared on BloggingStocks on Wed, 19 Jan 2011 10:30:00 EST. Please see our terms for use of feeds . Permalink | Email this | Comments

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The Fed Blows a Cupcake Bubble

The number one cupcake play in America is going public. Crumbs Bake Shop operates 34 cupcake stores from New York to California, humorously billing itself as “creator of the gourmet cupcake.” Owners stand to make up to $100m from the IPO, and the deal could price higher, with cupcake-mania hitting a fever pitch. At $100m, investors would be paying about $3 million per cupcake store. Management is betting on aggressive expansion to fuel growth, and plan to open hundreds of new stores. Naturally, growing a chain of stores from 34 to 300 is no easy task. Recall the great donut bubble of 2003… Krispy Kreme (NYSE: KKD) was the darling of Wall Street. Its shares peaked at near $50 from a split-adjusted IPO price of $3.50, giving the donut maker a sky-high valuation of $3b (pdf). Shares trade around $7 today, up from a low of around $1. KKD expanded too fast, took on too much debt, and nearly went bankrupt. They also had some accounting issues, but those likely were probably just a side effect of a business-plan gone bad. Today Krispy Kreme is still muddling along, closing stores opened just a few years back. Expansion is always risky — especially when financed with debt and equity offerings. Hopefully Crumbs can avoid a similar fate, and follow the glorious path of Chipotle instead, which is up 436% since its IPO in 2006. In any case, I wish them well; I’ve heard their cupcakes are delicious. The larger point here is about what this cupcake IPO says about the state of markets. After all, it almost certainly wouldn’t be happening without all that Fed-injected liquidity sloshing around. Back in July 2008, The Onion published a prescient piece titled, “Recession-Plagued Nation Demands New Bubble to Invest In”: What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future. Congress is currently considering an emergency economic-stimulus measure, tentatively called the Bubble Act, which would order the Federal Reserve to begin encouraging massive private investment in some fantastical financial scheme in order to get the nation’s false economy back on track . Even Jonathan Swift would have to appreciate satire so pointed. Unfortunately, the bit reads a lot like a Fed policy statement. Change the title to “Encouraging Risk Investment During Recession,” and any good Fed economist would nod along in agreement. The sentiment is identical. Bernanke has often stated that he wants to create a “wealth effect.” Push stocks higher, the theory goes, and people will spend more because they feel richer. Long-term thinking, truly… It’s been two and a half years since the Onion piece was written. Not only did we get one bubble; we got a handful of them. Notably in commodities, metals, food prices, and treasury bonds. Malinvestment and moral hazard ride on in 2011 One of the nastier side effects of “easy money” policies is known as malinvestment . It almost sounds harmless… mal- investment ( mal = bad). After all, everybody has a loser every now and then, right? The problem with easy money is that it inevitably spurs not just bad, but dangerous investments. During the tech bubble, it was countless doomed tech IPOs. In…

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Top Picks 2011: Equity Residential (EQR)

Filed in Bank Gold, o by on January 6, 2011 0 Comments

Filed under: Newsletters , Stocks to Buy , Housing , Financial Crisis , Best Stocks for 2011 This post is one in a series in which more than 60 newsletter advisors share their Top Stock Picks for 2011 . This special report is courtesy of TheStockAdvisors.com . “With fewer people tapping the housing market, apartments are filling up fast. That’s one big reason I like Equity Residential ( EQR ) for 2011,” says income specialist Amy Calisti . The editor of The Daily Paycheck explains, “Equity Residential is an S&P 500 company and the largest real estate investment trust (REIT) of its kind. Continue reading Top Picks 2011: Equity Residential (EQR) Top Picks 2011: Equity Residential (EQR) originally appeared on BloggingStocks on Thu, 06 Jan 2011 10:00:00 EST. Please see our terms for use of feeds . Permalink | Email this | Comments

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Weekend: Wall of Worry

Weekend: Wall of Worry

Welcome to the Wealth Daily Weekend Edition— our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles. Before the bulls break out the champagne today, I would warn them not to get too far ahead of themselves. After all, euphoria is a dangerous emotion that can lead to big losses — in this market or in any other. What is crystal clear is that our problems are not only ongoing but persistent. Certain cans have been kicked, but they are still in the road. Fundamentally, the picture is as clear as mud, even though the bulls are ready to break out the party hats in 2011, insisting that the markets really will grow to the sky. If only it were so… Advertisement Gold’s “Louisiana Purchase” Not long ago, the world’s largest uranium giant practically gave away billions of dollars worth of gold to one small exploration company… for only $250,000! Before their next set of drill results are posted, find out how this rare opportunity could easily triple your money by September! Click Here For Your Free Report Now! Of course, we know otherwise.I’m firmly in the camp that believes a “new normal” has begun; it springs from economic necessity as the middle class digests a greater new reality. This brave new world will be focused more upon frugality than on frivolity. As unemployment persists, home prices continue to drop, and more wealth evaporates, consumers are more likely to try living within their means, no matter how hard that may be. As a result, without a steady up-tick in jobs or boost in income, a repeat of the consumption-bubble we just lived through simply isn’t going to happen. Nor can it be recreated — despite the fact that the Fed is trying its best to do just that. So, what we’re essentially left with is a classic case of a reluctance to borrow or consume.And that’s a big problem, since that’s what the lion share of the U.S. economy has been based on since 1982… We have too many cars, too many houses, and too many debt holders who can’t support it all. Sure, Ben Bernanke and friends are providing plenty of liquidity; but those mountains of dollars will have very little velocity when a nation of good-time Charlies suddenly decides to live within their means. As I’ve said before, you can lead a horse to water, but you can’t make him drink. That being said, I thought we would play …

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The Top 25 Financial Stories of 2010

Filed in Alan Greenspan, BP, ceo, Debt, economy, Gold, GOld juniors, lead, o, recession by on December 23, 2010 0 Comments
The Top 25 Financial Stories of 2010

So long farewell, auf weidersehen good-bye 2010. I can’t say that I will miss you. In the meantime, let’s hope 2011 isn’t the year that all of the chickens come home to roost. Because no matter how many times you try to slap a happy face on it, the economy and the markets are as tenuous as ever. Even still, as crazy as 2010 turned out to be, the year did give us plenty to write about here at The Daily Ration. Go figure. That being said, here are my top 25 blog posts of the year. In no particular order these are the stories that for some reason–in my opinion at least— say the most about who we are and where we are headed. You see, the problems that we really face are all systemic leading me to believe that the status quo cannot possibly be maintained… They include: Stiglitz: “Moral Hazard Everywhere” : Too dangerous to ignore…. Blue States Bleed Red Ink : This is a shocker… The $1 Trillion Pension Gap : The bill has come due…. Taibbi: Goldman is Creating the Conditions for Another Crash : From the vampire squid… Elizabeth Warren Warns on Commercial Real Estate: The voice in the wilderness… NEWSFLASH: Social Security is Now Cash Flow Negative : Charles Ponzi lives…. Rickards: China is “The Greatest Bubble in History” : The pressure is building….. Must See TV: Michael Lewis on 60 Minutes : Inside the doomsday machine….. Baby Boomers Take a Back Seat in The Great Recession : Bummer dude…. China’s 2012 Crisis: Cracks in The Great Wall… Roubini on Greece: The Tip of the Iceberg : Reckoning ahead… The No Spin Zone: Bill Black Calls BS : People need to fry for this….. Epic Fail: Brooksley Born Demolishes Alan Greenspan : Blah, blah, says “the maestro”…. Meredith Whitney Predicts a Housing Double-Dip : Spot on analysis…. The $19.6 Trillion Debt Bomb : Someday the bill will come due… The World According to Bill Gross Part 3 : Flushing money down an economic toilet….. Intel CEO Bodyslams Big Government : Truer words were never spoken… The Debt Slaves Revolt : Maybe it will all just go away…. Notes From Recovery Summer : It’s different this time…… The Middle Class Recession : And they wonder why people are angry….. The “Real” State of Small Business : The Must See Video of 2010 The Student Loan Scam : This is shameful… Gross, Grantham Agree: QE 2 is Troublesome : The last gasp… Hoenig: QE2 May Lead to “future instability” : A voice from the wilderness… Zillow: Another $1.7 Trillion to the Downside in Housing : Sorry Charlie….. So Adieu, Adieu, Adieu, Adieu, to you 2010. All things considered, I suppose it could have been much worse. Two hundred blog posts later that is all there is for the year—unless,of course, something really wacky happens. In the meantime, have a wonderful holiday season and a very Merry Christmas! See you in 2011….. To learn more about

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Weekend: 2011 Stock Market Forecast

Weekend: 2011 Stock Market Forecast

Welcome to the Wealth Daily Weekend Edition— our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles. It’s not often that Bloomberg’s headlines give me much pause, but this one sure did. Bullish to the max, it quoted an analyst named Brian Barish from Cambiar Investors who believes the S&P 500 will gain 17% from here. In fact Barish believes the S&P 500 will rise to 1,300 by June 30, and to 1,380 by the end of year based on the weighted average of estimates by Cambiar’s nine analysts. Advertisement The Video Footage that has Electric Companies Terrified They won’t announce it yet, but your utility company is shaking in its boots… That’s because one tiny engineering firm just demonstrated a technology that could put every last utility out of business— by harnessing your own solar energy at any time, from any window ! Before the first big ticket contract comes through — doubling the share price — click here to see exclusive footage. Propelled by energy and industrials, 2011 will be marked by a “multi-speed recovery” that will completely lay waste to the “new normal” thesis put forward by the likes of PIMCO and your humble analyst. Instead, Barish believes, “the bleeding has stopped” as low market multiples will give way to an environment where multiples expand. In short, it’s the classic bullish argument, since the price-to-earnings ratio is now 15— below the 16.4 average for the index going back to 1954. But as every market watcher knows, Barish’s thesis eventually comes to rest where all of them do. In the end, it will always be all about earnings. That’s why we aren’t so eager to help ourselves to all of this bullish Kool-Aid talk of late — especially as Goldman Sachs boosts their outlook to 1450 (!!) for 2011. Now for those of you keeping score at home, Goldman’s latest forecast would put the S&P 500 right back within a whisper of its 2007 highs, going back to the days of the housing bubble peak. How they arrive at that figure, I’ll never know… After all, is there anything that leads you to believe we are going see to the type of real economic activity we witnessed before it all fell apart? A return to the 2007 peaks? I would even argue the two-year peaking cycle — circled in the chart below — was nothing more than an illusion brought on by cheap credit and the bubble atmosphere it created. Without them, in other words, that peak encompassed by the circle never would have happened. In many ways, it really was mirage. Simply put, the market overshot at the top the same way it overshot at the bottom. It was, in the purest sense, a function of our bubble-based economy — similar to the market action after the dot-com bust. Of course, that doesn’t mean another stock market bubble cannot form anew. The FED is actually working overtime…

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Zillow: Another $1.7 Trillion to the Downside in Housing

Zillow: Another $1.7 Trillion to the Downside in Housing

My pal Charlie is as persistent as the sunrise. So when he called me last week to give me a hard time about my 2011 Housing Market Forecast the only surprise was it that took him so long. Twenty-four hours after it hit the web I saw Charlie’s number go up on line one. You see, a real estate agent by trade, he never misses a chance to call me an idiot when in his eyes I “bad mouth the American Dream” The result has been five-year running dialog in which I have bested him every single time. The guy is a glutton for punishment. So like a good pal I answer the phone anyway even though I know I’m in store for the rerun of my nightmares. “Steve,” he says, “you can’t be serious.” “As a heart attack,” I answer, “Like it or not dude there is still another 8-10% downside.” This obviously drove him to distraction since he must have forgotten the 100 or so conversations we already had that were exactly like this one. “Not a chance this time son. There has never been a better time a house”, he told me with what I can only guess was straight face. From that point on I knew I was just wasting my time again. The dude may have been great scrum-half but he didn’t know jack about the laws of supply and demand. In fact, I don’t think they actually teach that real estate school but I hear the Kool-aid is top notch. Meanwhile, the mountain of evidence against my friend continues to mount. From Bloomberg by By Hui-yong Yu entitled: U.S. Home Values May Drop by $1.7 Trillion This Year: Zillow “ U.S. home values are poised to drop by more than $1.7 trillion this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data. This year’s estimated decline, more than the $1.05 trillion drop in 2009, brings the loss since the June 2006 home-price peak to $9 trillion, the Seattle-based company said today in a statement. The drop in home values pushed more buyers underwater, meaning they owe more on their mortgages than their homes are worth, Zillow said. The percentage of homeowners with so-called negative equity reached 23.2 percent in the third quarter, up from 21.8 percent at the end of 2009. “ With foreclosures near an all-time high in late 2010 and high rates of negative equity persisting, it does not appear that the first part of 2011 will bring much relief,” Stan Humphries, Zillow’s chief economist, said in the …

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