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'Upside-down' homes rife in Riverside Co.

November 12, 2008 12:00:00 AM PST
In Southern California, thousands of homeowners find themselves stuck in "upside-down" mortgages. That is, they owe more on their homes than their property is worth. Especially hard hit: Riverside County. The situation is dire in San Jacinto and Lake Elsinore. It seems as if there's no end to the dead grass and for-sale signs. Tracy Lord says it's getting worse and worse in her neighborhood.

"Oh, there's a lot of foreclosures. When we bought here two years ago, there was very little foreclosures, most of the houses were occupied, people living in them, and now there it's two or three on every street. People have just walked," said Lord.

"Negative equity" is the technical term for being "upside down" -- basically, owing more on your house than it's worth.

In San Jacinto, almost 80 percent of homeowners will soon be "upside down."

When measured by zip code, that's the sixth highest number in the country. A zip code in Lake Elsinore isn't far behind, at number 10. Winchester is number 14. And Perris: the 16th highest number of upside-down homeowners in the country. And all of those places are in Riverside County.

"We have quite a few in our neighborhood also that are upside down and losing their homes. Fortunately we're not one of them," said homeowner Tim Santos.

But Santos says he knows that could change, and change quickly.

"We planned ahead, but yes, if the market continues to go down, we could go upside down in our home," said Santos.

UC Riverside economics professor Mason Gaffney says the housing market is in a vicious cycle right now, simply because there are too many homes. And because demand is down, prices go down. That means more people go upside down, and then foreclose.

"The overbuilding has gone to a great extreme here in Riverside," said Professor Gaffney. "I'm afraid it's going to take years to work off the excess."

How many years is anybody's guess. Prof. Gaffney doesn't think we'll hit bottom in the housing market for another three years.


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