48% of homeowners with mortgages to be underwater by 2011

That's the forecast of Deutsche Bank, via The New York Times:

The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.

Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.

"We project the next phase of the housing decline will have a far greater impact on prime borrowers," Deutsche analysts Karen Weaver and Ying Shen said in the report.

Of prime conforming loans, 41 percent will be "underwater" by the first quarter of 2011, up from 16 percent at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties' value, up from 29 percent, it said. ...

Las Vegas and parts of Florida and California will see 90 percent or more of their loans underwater by 2011, it added.

Note: I believe The New York Times has made a significant and sloppy error. It says 48% of homeowners will be underwater, when it should be 48% of homeowners with mortgages. Not all homeowners have mortgages. A homeowner without a mortgage cannot go underwater. If memory serves me correctly, roughly one third of homeowners own their home free and clear. That makes it mathematically unlikely that half of all homeowners could end up underwater. I checked Bloomberg, and they say 48% of homeowners with a mortgage, not 48% of all homeowners.