May 10 (Bloomberg) — More than a fifth of U.S. mortgage holders owed more than their homes were worth in the first quarter as repossessions climbed to a record, according to Zillow.com.
Twenty-three percent of owners of mortgaged homes were underwater during the period, up from 21 percent in the previous three months, the Seattle-based property data provider said today in a report. More than one in 1,000 homes were repossessed by lenders in March, the highest rate in Zillow data dating back to 2000.
Underwater homes are more likely to be lost to foreclosure because their owners have a harder time refinancing or selling when they fall behind on loan payments. U.S. home values dropped 3.8 percent in the first quarter from a year earlier, the 13th straight period of year-over-year declines, Zillow said.
Read more from BusinessWeek
Many of the foreclosed homes are strategic defaults. According to UPI.com the percentage of foreclosures that were perceived to be strategic defaults stood at 31% in March 2010. The percentage was 22 % a year ago. This figure will continue to rise because homeowner believe that banks will not aggressively pursue them when they walk away. One of the factors keeping a lid on walkaway is the fear of a bad credit score. However, some homeowners are finding creative ways of purchasing a new house, then doing the strategic default.