05/10/2011 02:44 pm ET | Updated Oct 25, 2012

Chicago Mortgage Crisis: Nearly Half Of Borrowing Homeowners Are Underwater, Says New Report

Newly released statistics show a mortgage crisis that is only deepening in the nation's third-largest city, with staggering numbers of homeowners in dire straits.

Almost half of mortgages in the greater Chicago area are now "underwater," according to the study by Zillow. That means that homeowners owe more than the value of their homes, a product of plummeting housing prices.

The proportion of underwater mortgages in Chicago, 45.7 percent, is eighth-highest among the nation's 25 largest metropolitan areas, and pales in comparison to the devastating 68.4 percent of underwater mortgages in Phoenix, Arizona, the nation's highest among big cities.

But the speed with which underwater mortgages have grown in the area is much more disconcerting. Just last quarter, the figure was only 38.6 percent; a year ago, it was just under 32, reports Chicago Real Estate Daily.

“Home value declines are currently equal to those we experienced during the darkest days of the housing recession,” Zillow Chief Economist Stan Humphries said in a press release accompanying the report. Prices were buoyed temporarily by the federal home-buyer tax credit, but with that credit's expiry, the floor has again fallen out from under the market.

Indeed, the Chicago Tribune reports that both home sales and prices dropped sharply in the first quarter. Sales were down 9.9 percent from a year ago, and the median price of a home was down to $155,000, down 11 percent from the same time a year ago.