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"Underwater" households resurfacing? It depends

Many San Diego County homeowners are “underwater” — they owe more on their mortgages than their homes are worth. But the economists who measure such things disagree on the volume of what's formally called “negative equity” and whether it's getting worse.
Depending on which number you believe, the implications for how you and your neighbors behave can vary widely.

If you think things are getting worse, do you walk away from your mortgage and incur a stain on your credit?

If things are getting better, do you continue making payments in hopes that you'll rise above water sooner rather than later?

And you have to make the decision amid an economy struggling to escape the recession.

On Aug. 5, Deutsche Bank raised eyebrows across the country when it said 48 percent of all Americans holding mortgages — 25 million households — could be underwater by early 2011. The San Diego metro area was projected to hit the 51 percent underwater mark.

...Norm Miller, a real estate professor at the University of San Diego, believes Deutsche Bank has exaggerated forecasts of further price declines. The bank thinks San Diego prices will drop an additional 8.7 percent from the first-quarter median house price reported by the National Association of Realtors, $323,200. (Full story)