More bad news for LI home prices

About 6.1 percent of Long Island's mortgage borrowers owe more on their loans than their homes are worth, and the ranks are growing, according to a report released Tuesday.

The owners of the 31,987 homes had negative equity or were "underwater" in the last three months of 2010, mortgage tracker CoreLogic said. That's up from 27,729 homes, or 5.4 percent of mortgages, in the same period a year earlier.

Another 1.8 percent of homes, or 9,434, were in danger of being underwater, up from 9,233 homes a year earlier, when 1.8 percent were also at risk, data show.

One Smithtown appraiser said he believes the figures are understated.

"There's a ton more than that, more so than anybody will ever admit," said Mark Davella, owner of Real Estate Assessment Group.

He said it's becoming more common for homeowners to play a "short sale" game. They try to sell the house to get out of mortgage debt and persuade lenders to accept less than owed or be "shorted" on the mortgage, Davella said. After the home is sold, he said, the sellers then buy another house "across the street" or in the same school district at today's lower prices.

Home values will keep falling, Davella predicted, as the federal homeowner rescue programs give lenders incentives to do short sales and as lenders push foreclosures into the market. Both drive prices down.

"It's going to be like this for the next four or five years," Davella said.

Nationwide, almost 27.9 percent of homes with mortgages were underwater or close to it, CoreLogic said. That's 25 million homes, the report said.

Liz English, president of the Long Island Board of Realtors, said many sellers still don't believe how far home values have fallen.

It's an obstacle to the home market recovery when sellers put high listing prices even though nearby homes have sold for less, agents said.

" 'That was the house next door,' " English said some sellers say. " 'Mine is different.' "