Posted on 05/11/2011 3:34:38 PM PDT by Razzz42
1) Remember, these stats rarely include second mortgages or firsts that were refid after the purchase where cash out was pulled and the loan amount was increased, as most negative equity estimates are based on original purchase price of the house itself. Zillow, quoted in the story below, is one that uses original purchase price.
2) With respect to negative equity as it relates to the housing market and repeat buyers the much needed but missing ingredient to a magic housing fix effective negative equity is far greater. This is because to rebuy a homeowner has to sell, which means paying off the first (and second) mortgages, paying a Realtor 6% and putting 10% to 20% down on the new purchase. When you lower the negative equity thresholds to real life, effective negative equity is epidemic and will keep the organic buyer especially at the mid-to-high end at bay for a generation.
(Excerpt) Read more at mhanson.com ...
Link to the article that Mark commented on....
http://www.cnbc.com/id/42957613
We don’t need these data to tell us we have a stupidity epidemic in the USA.
The 2008 election clinched that label.
We don’t need these data to tell us we have a stupidity epidemic in the USA.
The 2008 election clinched that label.
Unless... the homeowner wants to keep and rent out the first dwelling. That's what my parents did, twice. It was lucrative enough to leverage a modest salesman's salary, with his wife's entrepreneurship, into a middle class home.
Not everybody who has negative equity has a bad loan. There were a few years (bubble) where most all buyers paid inflated prices for their homes. I think the number of homeowners who have devalued (bubble burst) homes is real trouble for our economy.
I have no idea how to solve this problem and I don’t see it changing soon.
It only becomes a distress situation if you either have to sell right away or you become unable to make the payments. If neither applies, market value does not matter. In many cases owners have made money repeatedly when values rose and interest rates went down with cash-out refis.
Values always have come back, it is just a matter of how long it takes.
The solution is more government money for home buyers who can’t pay their loans. You guys are slow learners.
Zillow is largely fiction
Given that the bottom of the housing market hasn’t hit yet, and might not hit until 2015, that “matter of time” could be twenty years.
And I didn’t make any money because we never cashed out our equity. Not all of us acted like it is normal to treat your house as a cash machine.
The last time we had a debt deflation like this one, it was more than a decade.
And back then (the 30’s), home prices weren’t the big debt bubble deflating - it was farm loans. And much of that farmland took the better part of 20 years to regain valuations.
. "Today Zillow.com reported a new high in negative equity: 28.4 percent of single family homes with a mortgage (remember, 32 percent of all homeowners do not have a mortgage).
So, right away we can see that we are talking about 19% of all homeowners (28.4% of 68% [those who have mortgages]; a figure that's about 32% less tragic than it seems.
"That's a national average, but the numbers are far worse in some of the nation's big metros. Atlanta, for example, has a 55.7 percent negative equity rate. Denver, 41 percent, Chicago nearly 46 percent. This is on top of all the foreclosure hot spots like Phoenix, where close to three quarters of all borrowers are underwater.
The "national average" hides the fact, the details, that the bulk of the "scary" national average is built on big "negative equity rates" (way bigger than the national "average") in what is less than half the metropolitan areas of the country. Yes, we have a problem, but when you dig into the details of the national stats you find the problem has a live experience in reality that is not "national" but resides in very specific housing markets in the country - not "the nation" as in "all over the nation" and "every place in the nation".
Instead of talking about the national stats, peoples focus should be 100% on the specific locales where the extremes of the problem exit.
I hope you all understand the gummint is on the hook for about 90% of all mortgages and as prices fall the losses escalate.
I don’t see any scenario short of hyperinflation that all the mounting debt can be repaid.
It is interesting that everyone is crying about “distress sales”.
The Value is what a buyer will willingly pay when a seller is ready to sell.
If the price is lower than the seller wants there is nothing “distressed” about it if they accept the offer.
The reality is that the housing market is far worse than statistics reflect because many sellers are holding off “waiting for a better price”.
That could be a very big mistake.
I think this is what will make inflation necessary in the future.
I've come to the same conclusion.
That’s the American way and most excellent. You come from good stock... for a redneck. ;-]
Maybe a new gold mine will be discovered in Washington, D.C.
The FDIC will reimburse the amount lost due to the foreclosure. More government problem solving creating.
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