Posted on 03/08/2008 5:54:31 AM PST by TigerLikesRooster
Americans giving up homes before other assets as credit bubble bursts
By James Saft Published: March 6, 2008
LONDON: The way Americans go bust has changed fundamentally, and the implications for financial markets are both important and negative.
In the more innocent days before the debt bubble popped, vulnerable borrowers tended to do everything they could to hang on to their houses. The result was that they would stop paying off their credit cards first, the car loans second and only last would they default on their mortgages.
But for many Americans in the credit bust, especially an overburdened minority, that set of priorities has been turned upside down.
"It's the American way of deleveraging," said Jochen Felsenheimer, a credit strategist at Unicredit in Munich. "First you sell your house, second you sell your car and in the end you also sell your TV set."
The numbers bear him out. Subprime housing loans started to go bad first, followed with a lag by subprime auto loans and now credit cards.
(Excerpt) Read more at iht.com ...
Ping!
You need your car to commute to work. There’s no shortage of housing for rent, but most cities have no cheap transportation infrastructure. A car is essential for a good job, in most cases.
Agree.
Maybe the writer thinks we’d be better off with 10-15% unemployment and a no growth society like his.
Actually......they made loans to people on a massive scale ...who were too high-risk.
People use to do everything to hold on to their house because they had to have some equity. Now they started out with little or no equity and it went down from there. There is nothing to lose but debt.
Great Britain has an unemployment rate of 5.2% and an economy that is pretty dynamic.
I believe most of those cases are "speculation homes", not long ago we were told that lots of Americans bougth second and third homes for speculation in the fast rising market.
I find it hard to believe that someone would give up primary residence before defaulting credit card and car loans, after all beside turning homeless one needs to own or rent home or apartment, and rent is not free.
The IHT is owned by the New York Times.
The condos where I live were swept up by a consortium of New Jersey wise guys and their families. We stand at 70% vacancy today, and upkeep fees keep rising. Thanks, guys!
He told me he probably will declare bankruptcy and he currently is working weekends for cash cutting yards for cash to save up to buy a smaller home after he does
My loan officer told me I’d most likely be selling the house in less than seven years as that was the average length of time a house is owned. Up until then I hadn’t thought about it.
What is most troubling, however, is that too many Americans were eagerly paying $400,000 for $200,000 houses because price did not mean anything to them when they were paying with borrowed money, borrowed on foolish terms, that they could not repay.
Now they are desperately holding on to credit cards by "paying" them (I would bet you it is most often the minimum payment) each month so that they can eagerly spend beyond their means with borrowed money, borrowed on foolish terms, that they cannot not repay.
America has become a nation of irresponsible children without any self discipline.
Why would anyone with half a brain sign on to an ARM? Buy a house you can afford, get a 15 year fixed rate, and no worries.
A home is just a house, but a fine set of wheels is a Ride
Wow. I was raised that if and when you buy a house it is a home to live in the rest of your life.
Let me see the government forced lenders to make loans to people who they knew couldn’t keep up the payments even if they had 3 jobs for thirty years then they gave them permission to ARM the loans so the rates would skyrocket ?
Hmmm wonder whos fault the bubble got blown up oversized to begin with ?
secondhand household goods won’t fetch much anyway, and it’s near-impossible to get around without a car in most places.
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