The negative home equity nightmare: Housing won't stabilize until 2011

Aggressive lending practices fueled the housing boom, and the availability of generous sums of mortgage and home equity money left borrowers with more debt and less equity than ever before. The Federal Reserve reported that home mortgage debt grew at a double-digit rate every year from 2002 to 2006. But as real estate markets across the country have seen price declines between 10 percent (Dallas) and 54 percent (Phoenix), an estimated 11 to 15 million households are now "underwater" on their mortgages, owing more than their house could be sold for today. This overhang, already being blamed for exacerbating the decline in residential real estate, likely won't peak until 2011, according to a research note from Deutsche Bank obtained by DailyFinance.

Deutsche Bank says that nearly $6 trillion in home equity has been vaporized since the peak in housing prices, and any quick recovery would be dependent on repeating the same lending mistakes that led to the boom -- an unlikely proposition. As housing prices continue to fall, the firm estimates that 25 million homeowners, or 48 percent of all mortgages, will eventually wind up being underwater.