From The Wall Street Journal
The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on their mortgage than their home is worth, raising the possibility a greater increase in defaults.
Having more homeowners under water is likely to mean more eventual foreclosures because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds their home's value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood.
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