I’m not sure what to think about this “underwater” concept of mortgages. Number one, you don’t buy a home with the idea it’s always going to increase in value. It will go up and down in value throughout the life of the mortgage and afterwards. So if you bought your dream home and it has lost market value, it’s still your dream home. It means absolutely nothing unless you are going to sell. The only time “underwater” really means anything is if you want to sell or take a loan on the property. If you are living in the home and making the payments it does not matter one bit.
I really think this “underwater” statistic was used to “make up” a crisis so the government could take over the mortgage and banking industries with Tarp. I think the reality is there is no crisis in the housing market. It’s a down market in some areas and this was very predictable for those areas involved.
That's the reality. However, the real estate industry has been pushing homes for the last two decades as an investment. Marketing - once again it has destroyed common sense.
Unfortunately, the -0 managed (trashed)
economy, the anxiety of private sector
small business to plan any expansion or
staff up with all the unknowns, the
remaining high unemployment (likely
indicative of more foreclosures), will
continue to have a substantial impact on
real estate values.
No, “underwater” is far from made up.
If someone bought a home in Sacramento for $500,000 with 10% down payment of $50,000, you have a mortgage of $450,000.
Today, that home is worth $260,000. The buyer lost all his down payment and the house is worth $190,000 less than the buyer owes. The contract says, don’t pay and we take your home. So he doesn’t pay and he loses his home.
5 years from now that home will be back to $275,00 to $300,000, his credit will be restored and putting 10% down he could buy it back have a loan of $270,000.
If he kept paying the original $450,000 loan, he would owe well north of %400,000.
You do the math. Walk away, cut your payment in half and owe $270,000 or stay and owe north of $400,000.
No, it is definitely not a made up phony thing. You sound like someone who bought many years before the bubble started and have no appreciation for owing twice what an object is worth. It makes no financial sense to keep paying on it.
Where the banks blew it, was allowing for no down payment loans so owners had no skin in the game. If everyone had to put down 20%, a lot less people would be underwater. A lot less people.
And the crisis in housing is very very very real. You need to study up about it to appreciate how very real this crisis is. You will be hearing more about it now that Fanny and Freddie own ALL of the mortgages and are bleeding bad loans profusely. A lot of your tax money will be going to keep Fanny and Freddie solvent.
Let me help.
Try loosing your job, having to take a job 400 miles away because it was the only one you could find in 6 months of looking, even if you have to take a 15% pay cut, not being able to sell your house because its value has dropped about 20%, so you either live in a camper while your family (with four kids) stays in the house with no hope of being reunited with your family within the next 5 years due to the crappy home market.
That's not a made up crisis. It's all too real.
Glad I could help.