Nearly 1 in 6 Home Owners 'Under Water'?: Is this possible?
This shows the problem of not requiring much in the way of down payments. Here is the WSJ article:
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."
Among people who bought within the past five years, it's worse: 29% are under water on their mortgages, according to an estimate by real-estate Web site Zillow.com. . . .
Labels: Economy
posted by John Lott at 4:14 AM
4 Comments:
http://obama.senate.gov/press/070322-obama_urges_ber/
Here is the "warning letter" Obama said he sent to "warn" about the mortgage crisis.
He warns Bernanke and Paulson to BAIL OUT THE MORTGAGE HOLDERS so they can KEEP the home THEY CANNOT AFFORD.
He want MORE MONEY FOR ACORN.
"to support independent community-based-organizations to provide counseling and work-out services to prevent foreclosure and preserve homeownership where practical."
He MISLED or even LIED about the context of that letter. HE IS A FRAUD!
Everyone told me that real estate is always a good investment because it never goes down in price. My real estate agent, my mortgage broker, my friends, and co-workers all told me this. Renting a place was simply throwing away money and I had to buy.
What went so very wrong?
This concept of being 'under water' is not very meaningful. The marketplace for purchasing homes fluctuates, both up and down, so it is entirely possible that the outstanding balance of your home loan is greater than the homes current potential sale price. Is this bad? No. It simply tells you that now is not a smart time to sell. You have no 'right' to profit from your home.
What really matters is your _ability_ to repay the loan. You have a job, creditworthiness ('subprime' debacle notwithstanding), income, and have agreed terms on a loan contract - the bank buys the house, you assume ownership on the condition that you repay in accordance with a schedule. Has that changed? Has that arrangement been damaged in any way by the vagaries of the homebuying marketplace? No.
In a month from now, or a year, those same people could be sitting on a home worth 20% more than the original purchase price.
This is a bullshit 'scare' statistic that gets thrown around to justify political agendas.
Amen to Anonymous above.
"Under water" means nothing in relation "able to service debt".
It is the latter which determines whether a mortgage goes into default or a business fails.
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