By 2011, 48% of Mortgages Will Be Underwater

Nearly half of US homeowners will owe more than their house is worth by 2011, Deutsche Bank analysts said yesterday, predicting that the number of such “underwater” mortgages would nearly double from today’s 26% to 48%. Their report stated that home prices will fall another 14% between now and then, and that those declines will have a huge impact on prime “conforming” loans, which make up two-thirds of all mortgages.

Underwater homeowners often intentionally default, leading to vicious cycles of foreclosures and dropping prices. But the doom-and-gloom report comes amidst signs that the market is stabilizing. According to one index, prices rose in July for the first time since 2006. (More mortgage stories.)