Home prices may be stabilizing in some areas in the nation, but the damage has already been done in the housing markets that saw the biggest boom and in turn the biggest bust. Home buying in these markets reached a frenzied pace during the middle of this decade, and that means that a good portion of buyers purchased homes at the top of the market. No surprise that they have now sunk deepest underwater on their mortgages. Cities_Underwater_Mortgages_promo.jpg A new survey from Zillow.com shows that even in those markets where investor competition has returned and prices on the low end are beginning to stabilize, homeowners still owe far more on their mortgages than their homes are currently worth. (Get educated before you make a change: 6 Questions to Ask Before You Refinance) Las Vegas leads the way with 81.8 percent of borrowers underwater on their loans in the third quarter of this year, down barely one percent from the second quarter but still up 10 percent from the first quarter. The bulk of underwater borrowers are in California, Florida, Arizona and Nevada. While home prices nationwide were down 8.5 percent in September from a year ago, prices in these states are still way down -- 34 percent in Las Vegas, 26 percent in Orlando, 23 percent in Phoenix and 11 percent in Los Angeles (National Association of Realtors). Again, that's from a year ago, but many of these cities have seen over 50 percent price declines from the peak of the market. more... http://realestate.yahoo.com/promo/us-cities-with-the-most-underwater-mortgages