Some traditionally stable housing markets are facing new stress as rising numbers of affluent homeowners find that they have little to no equity in their homes… A new Zillow study that says 20% of homeowners are underwater, with mortgages worth more than the value of their homes. Jumbo borrowers were once seen as less likely to default, because they were required to put down substantial down payments—ranging from 10% to 20% or more—even during the boom when lax lending ruled. But as home prices have fallen sharply, more markets that have lots of jumbo loans are seeing an outsized share of borrowers with negative equity. In the San Jose-Santa Clara, Calif., area, almost two-thirds of all outstanding mortgages are jumbo, according to Zillow. In that market, nearly one in five homeowners are underwater and that figure rises to around 45% when looking at mortgages obtained within the last five years.
By Nick Timarous< April 6, 2009, WSJ

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