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Which would only be a problem if they had a reason to sell soon... otherwise, it makes ZERO difference.

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You don't get it ,, there are always reasons to sell ,, a new job in another city , divorce , roof needs replacement and you're 100k upside down , need bigger house etc. etc. The banks have about 7 years of inventory RIGHT NOW and will have 9 years of inventory at the end of this year ,, prices are going nowhere but down, Orlando pricing dropped 14% in Jan 2010 alone!! try buying anything in that environment when you have to give an otherwise accurate appraisal a 20% haircut just to cover a 45 day period going into closing. Real life example ,, house refi'd at peak with 25% down/equity is negative with mortgage at 155% of current pricing ,, using standard ammort tools I see that it will take 17 years of payments to get down to even money ... will that person walk? You Betcha! Will that affect you? You Betcha! In Florida anyone who is underwater can stiff the bank with jingle mail and rent a bigger house for a MUCH lower payment and have no repair costs or hurricane insurance costs.

The "it doesn't matter" argument is just as stupid as hearing someone holding a worthless stock certificate in a bankrupt company say "It's just a paper loss" DUH! and that paper was a suitcase of $100's .

The "it doesn't matter" argument is just as stupid as hearing someone holding a worthless stock certificate in a bankrupt company say "It's just a paper loss"

That analogy would fit if these houses in question were becoming worthless and the homeowners becoming homeless as a result. But they aren't.

A better analogy would be someone who holds stock in a solid company, but the going price has dropped. You're only hurt if you're a SPECULATOR. Otherwise your investment in the company is still doing what it's supposed to. (Might be a good time to BUY instead of complaining about being unable to SELL.)

You don't get it ,, there are always reasons to sell ,, a new job in another city , divorce , roof needs replacement and you're 100k upside down , need bigger house etc. etc. The banks have about 7 years of inventory RIGHT NOW and will have 9 years of inventory at the end of this year ,, prices are going nowhere but down, Orlando pricing dropped 14% in Jan 2010 alone!! try buying anything in that environment when you have to give an otherwise accurate appraisal a 20% haircut just to cover a 45 day period going into closing. Real life example ,, house refi'd at peak with 25% down/equity is negative with mortgage at 155% of current pricing ,, using standard ammort tools I see that it will take 17 years of payments to get down to even money ... will that person walk? You Betcha! Will that affect you? You Betcha! In Florida anyone who is underwater can stiff the bank with jingle mail and rent a bigger house for a MUCH lower payment and have no repair costs or hurricane insurance costs.

I DO get it... but would argue that a pretty high percentage of these "underwater" people are only in trouble because they overextended themselves and didn't figure on a market downturn. Yes, I know some folks have to move due to job relocation, divorce, retirement, etc... and I feel for them.

Having to bail out all the speculators on top of the folks who truly are in trouble is a problem in my mind... if you gamble with a variable-rate or interest-only loan then as far as I'm concerned you gambled... shouldn't be the taxpayer's problem.