Posted on 10/08/2008 5:38:00 AM PDT by Sub-Driver
Housing Pain Gauge: Nearly 1 in 6 Owners 'Under Water' More Defaults and Foreclosures Are Likely as Borrowers With Greater Debt Than Value in Their Homes Are Put in a Tight Spot By JAMES R. HAGERTY and RUTH SIMON
The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on a mortgage than the home is worth, raising the possibility of a rise in defaults -- the very misfortune that touched off the credit crisis last year.
The result of homeowners being "under water" is more pressure on an economy that is already in a downturn. No longer having equity in their homes makes people feel less rich and thus less inclined to shop at the mall.
And having more homeowners under water is likely to mean more eventual foreclosures, because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds the home's value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood.
About 75.5 million U.S. households own the homes they live in. After a housing slump that has pushed values down 30% in some areas, roughly 12 million households, or 16%, owe more than their homes are worth, according to Moody's Economy.com.
The comparable figures were roughly 4% under water in 2006 and 6% last year, says the firm's chief economist, Mark Zandi, who adds that "it is very possible that there will ultimately be more homeowners under water in this period than any time in our history."
(Excerpt) Read more at online.wsj.com ...
[If someone can afford their mortgage payments and they have no intention of leaving anytime soon, then the “book value” of their home is almost meaningless.]
Yep. I was taught that a house is a place for your family live and feel secure; not a cash cow.
The simple reality is that demand for houses has dried up!
This causes a price drop that further decreases the demand.
Why did the demand dry up? We are now paying the price
for smaller families that started 25 years ago. Abortions
and birth control have now 25 years later caused a dip in the number of first time home buyers.
We now have a ‘population gap’ and it will get ugly as the
‘young’ figure out that they will have to pay for the ‘old’.
“A glance at the coming future suggests that she will not see that loss recovered for maybe 40-50 years”
Ah, you lost me there. There is no historical foundation for saying it will take “40 or 50 years” years for the housing market to recover.
She hasn’t “lost $250K” unless she has to sell.
Maybe she ought to stay put. Even until she is 95.
She has a roof over her head and that will never be worth “zero” (like our 401K will soon be)
If she dumps her house and “walks away”, where is she going? A cave?
People are just are not thinking rationally.
As for me, I’m going to live in my house, or use it to raise revenue by renting it to someone else.
agreed...though even the tax burden for the write-off is still a potential lowering to the net loss for those with resources to pay the tax.
In my neighbors case...
~$45k to the IRS
-vs-
~$300K loss(after loss of value in the principle on the note, plus the interest paid over 27 remaining years, plus the equity,) by remaining in an 50% undervalued investment.
Unnecessary sarcasm ends the conversation.
have a nice day.
Congress provided relief for a year or 2 on this. It isn't permanent...
I’m still amazed that your 65 year old neighbor would take on such a high mortgage with a payoff of 30 years. Seems to me that, yes she lived beyond her means for a great many years or she chose to take on the risk that comes with debt. Either way, her personal choice was a poor one and now the piper needs a payin.
Yes, I feel sympathy for the individuals, however we shouldn’t bundle all of the individuals together and bail them out at the Federal government feeding trough.
Heck if I know. Back to the trailer park?
Of course not.
There would be rules, you know. Just because something can go down a slippery slope (as can everything known to man) doesn’t mean it will.
There would be situations where restructuring would be helpful to the larger economy and where it wouldn’t be. This isn’t a reward to the individual per se.
It would be very simple to limit such a plan to home purchases (i.e., exclude refi’s) within a certain period of time (last five years, say) and where a certain downpayment (such as 10-20%) was put down by the home buyer.
If you’re in that category, my FRiend, your downpayment, however many tens of thousands of dollars it was, is GONE and is NOT coming back in a very very long time, if ever.
The loss of that downpayment is 100% caused by the policies of the U.S. Government through the RATS who flooded the market with toxic paper, insured it on our dime, fed the greed that is inherent in human nature, and now want to use our money to bailout deadbeats instead of giving a break to those who are contributors, not takers, in our economy.
>>Of course not.
If figured as much. Just highlighting the gray areas for the peanut gallery.
>>There would be rules, you know.
Yah, but that’s sorta the whole idea of a Republic - being a system of government, characterized by the Rule of Law; and look where we are now.
Eternal Vigilance?
=Bill
If they are paying on their loans foreclosure wouldn't enter it.....duh
Back then, some mortgages were written so that missing one (or maybe a few, but I think it was only one) payment caused you to lose the house, with no repayment of the equity in it. Contracts like this are no longer legal.
This is how the sales of the Clinton's Whitewater real estate thing worked. HRC said that it gave an opportunity to buy a vacation property to those who might not otherwise have qualified. I thought that the media would expose this, but it was just another oh-well.
Must have been a LOT of them written this way for foreclosures to go up to 50%. Or maybe there were other factors involved.
Thanks for the info...wasn't aware of it.
You explained things more clearly than I have heard anywhere. McCain should hire you.
“And at the time when she bought, nobody was out there telling average poeple like her that the ecomony was gonna bust, that the RE market was gonna tank and that her house was gonna be worth half the value in three short years.”
Actually, there were lots of us saying precisely that the RE market was in a big bubble, and an eventual economic downturn of some sort was entirely predictable. Let’s not forget, the RE bubble collapse was the trigger for the current mess, not caused by it. Quite a few people called RE the bubble that it was, but nobody wanted to listen.
Like most new car buyers, I’m “underwater” in my car loan, and have been almost since the time I pulled out of the car lot. Does this mean I should get federal relief??
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