Almost one out of six U.S. homeowners owe more on their mortgage then the value of their property, upping the chances for increased defaults, which is what led to the downward spiral of the credit disasters last year. The more that people feel they do not have assets, such as not having equity in their homes, makes then less likely to spend. Also, not having equity means that foreclosures will increase, as the borrowers are have trouble refinancing or selling their home to pay off their debt and end up losing the property. This affects the foreclosed home´s neighborhood as a foreclosure tends to bring down the value of neighboring homes, possibly hurting the equity of those owners, a domino effect.

According to Moody´s Economy.com, almost 75.5 million U.S. households own their home of residence. After the market fall out, home values went down as low as 30%, leaving 12 million or 6% of the self owned households, to owe more then their home´s value. Other data obtained from Zillow.com shows that out of all the homeowners who bought homes last year, currently about 29% of those owe more then their home value.

Of course, many homeowners still have equity, and some of those who do not are continuing to make their payments. The new legislations for financial bailout, may help to keep things from going further downhill, at least according to Celia Chen, Economy.com´s director of housing economics. She said that those legislations will help by assisting banks to put off further tightening credit. Of course, Chen does feel that credit will stay tight and home prices will continue to lower for at least another year.