More than 5 Million Homes Will be Worth Less than 75% of Their Mortgage

More than 5 Million Homes Will be Worth Less than 75% of Their Mortgage

"About 5.1 million mortgage holders (or roughly 10% of Americans with mortgages) will own homes that are worth 75% or less than what they owe on their mortgages by mid-June. This is the conclusion of a new study by First American CoreLogic given exclusively to The New York Times. One of the firm's senior economists, Sam Khater, told the paper, "People's emotional attachment to their property is melting into the air." The most astonishing number in the study is that it would take $745 billion to get mortgages to the point where no home loans in the U.S. were underwater."

SOURCE: www.dailyfinance.com...|main|dl4|link3|http% 3A%2F%2Fwww.dailyfinance.com%2Fstory%2Freal-estate%2Fmore-than-5-million-homes-will-be-worth-less-than-75-of-their-m%2F19342799%2F
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Well, everyday I search for some sign of an economic recovery, and everyday I find myself confronted with news that leaves me feeling less confident in any type of near term recovery, as a matter of fact, I am finding it difficult to hold onto the the last thin threads of hope of a recovery at all.

Any positive news regarding an economic recovery would be welcome.

I Kinda have to laugh at how stupid the system and those who bought into it are...
I mean it's sad that everyone is getting screwed by the housing industry, but the price of homes was way inflated and in my opinion it didn't take a genius to see that.

Now if the medical industry would just collapse too we could start rebuilding that in a way that is more affordable...

...who knows maybe I'll buy a house next year....ha...maybe I'll buy 2 or 3....

Pretty sad situation.

I think many of these homeowners knew they were paying too much for a house in the first place. They just figured that in time the house would grow in value. Unfortunately, they never anticipated a market downturn like this one.

They are in a really bad predicament and have very few choices.

reply to post by liquidsmoke206


My situation is a bit different than those that have purchased properties recently at inflated prices. I own two properties purchase more than a decade ago and I am not upside down at this point, but if this trend continues I will be soon.

The properties I own are a huge part of my retirement plan. Thankfully I still have some time before retirement and the option to let them ride in hopes the value will increase between now and retirement.

The combined value of these properties has declined well over $300,000. in two sort years.

As many Americans are relying on the wealth they have built into there homes for retirement, emergencies and such this trend must reverse or many will see great hardship in the future.

Originally posted by liquidsmoke206
I Kinda have to laugh at how stupid the system and those who bought into it are...
I mean it's sad that everyone is getting screwed by the housing industry, but the price of homes was way inflated and in my opinion it didn't take a genius to see that.

Now if the medical industry would just collapse too we could start rebuilding that in a way that is more affordable...

...who knows maybe I'll buy a house next year....ha...maybe I'll buy 2 or 3....

It would seem logical to purchase now as prices are way down but if you read further into the article you will find a prediction of houses purchased in 2010 being under water in 2011.

FANTASTIC! There are thousands of people like my wife and I who are in our 30s, have stable jobs just waiting to buy a house. We owned a house years ago and were offered a 300K dollar mortgage. You know what we did? We bought a house for $184K. One we could afford. We sold it luckily right before the collapse. Now we have been waiting for prices to come down. And there are lots of us out there. That's what the government and the media and the NRA fail to realize. As prices come down I can guarantee you housing sales will actually end up going up. would a bank rather lose a couple hundred grand on a house or not have it sell at all?

reply to post by Zosynspiracy


Same crap happened to us years ago. We had a budget and a max price. Every lender wanted to give us twice what we could afford. No one would even consider giving us the terms and amount we actually wanted.

I guess as we were laughing at how absurd it was a saying "F you" a whole lot of other people were accepting these crazy loans.

Finally, just a few days ago we got a decent quote under our budget with solid terms. Just waiting for the prices to bottom out a little more.

I understand the problem, had the same issue in the UK in the early 90s my property lost so much that it was down to 50% of the mortage..

But in 2 years it was worth double the mortgage.. so unless you can't afford to pay the mortgage, it's worth hanging in there and not thinking about values.. It is home after all..

But my heart does go out to those who can not afford their payments and end up losing everything.

reply to post by Zosynspiracy


What you're saying makes sense, but that is not what the foolish banks are doing. Everyone knows that a property is worth more when someone is living in it. That a bank would kick someone who has been an on-time paying client who has been hit by a job loss is not only close to immoral, it is terrible business. Extend the loan by 10 years, move the gent to principal only for a few years, figure something out, but keep him in his house and let him take care of it.

My friend just got transferred to Sacramento. He went into a couple dozen houses that were foreclosed. Plumbing fixtures torn out, appliances and lighting fixtures removed. Even the hardware on cabinets taken by the folks who used to live there. A bunch had obviously been taken over my kids/bums/drug addicts. Spray paint on the walls, meth being cooked in bath-tubs. $100s of thousand of damage in some of these homes. At a couple they had actually put carp in the swimming pools to eat the algae!

It makes no economic sense to kick these folks out, but they are doing it. They are doing it because they can foreclose on the house, essentially list it as a $0 based asset on their books and thus write it off. Then they can turn around and sell it for a couple of $100K to one of these JOs who are out buying hundreds of houses at auction.

The entire thing is further impacted by the debt/equity mandates and mark to market rules that feds impose on the bank. If a bank has a loan for a house for say $500K and the house drops to a value of $300K, the bank has to immediately mark the debt down to $300K, taking a $200K loss, despite the fact that with a 30 year loan and the high probability that the person will resume paying once he gets back on his feet the house and the likely cash flow will be worth more than $300K. They can write off the loan and remove this issue and stay in compliance with the fed regs.

If the feds came in and eliminated the mark to market for real estate and forced, yes forced banks to extend loan terms for folks who had good payment historys, this would not happen.

Its disgusting

reply to post by Zosynspiracy


FANTASTIC that you may profit off of the demise of others but you are missing the point, a great portion of Americans wealth is in there homes, as values decline so does the wealth of the American people.

reply to post by dolphinfan


I agree with what you are saying but think about this scenario. My wife and I went to a bank owned house the other day. The bank foreclosed on the property and the whole foreclosure process took like a year to complete. Well guess what the owner of the property did? He RENTED IT OUT during the entire process. Guess how much money he made in a year? He made almost $75K renting a house out that he DID NOT OWN ANYMORE. I hate banks but there are individuals out there that are just as irresponsible, immoral, and deceitful as the banks. The scenario I just mentioned is playing out x1000 all over the country. Foreclosed on home owners renting out property they no longer legally own while collecting money from people. So no wonder banks don't want to deal with these homeowners. They are tweaking the system just like the banks. The home owners that are ripping out their appliances and doing that kind of stuff are just immature and ridiculous.

reply to post by deepred


All of that "wealth" was fake in the first place. And when considering the value of that dollar has been dropping and wages have not been increasing that "wealth" means even less.

The milk they are crying over doesnt even exist.

Originally posted by thisguyrighthere
reply to post by deepred

 

All of that "wealth" was fake in the first place. And when considering the value of that dollar has been dropping and wages have not been increasing that "wealth" means even less.

The milk they are crying over doesnt even exist.

Yes but without that "fake wealth" you will not be able to buy any milk to cry over.

reply to post by deepred


Yeah it is FANTASTIC because those of us who ARE LIVING WITHIN OUR MEANS are having to bailout the majority of Americans who ARE NOT living within their means. Look that's how a free market works. Sorry but it's the truth. I'm not saying everyone who misses a few mortgage payments should be kicked out of their home. But for god's sake a few bad apples are spoiling the bunch.

My landlords have a MILLION dollar home. They both worked in the Mortgage industry and guess what they both lost their jobs. They own the townhome my wife and I are living in right now. They are upside down on it. I'm an RN and my wife is a manager for a retail store. We are solid middle class people. I'm not going to feel too damn sorry for my landlords who are living way beyond their means. They decided to go into the mortgage industry to make money. And money they made. I decided to go into nursing for job security and the ability to help people and contribute something to society. I'm not saying Im better than my landlords. But easy come easy go and they need to deal with their choices in life. Why the hell should my tax dollars go to helping them out? When they were making 10 times as much money as I was a few years ago. This is the NORM here in CA. People left secure 50K jobs to go chase the almighty dollar thinking they were going to be millionaires overnight. Now those of us who actually WORK for a living (anyone and their kid could make money in the mortgage industry a few years ago by signing papers all day) should feel sorry for a bunch of people that were making ten times that much money by sellling mortgages?

I don't think the UK has suffered the same as US. As far as I can tell people are not losing their homes in large numbers. Values have dropped a bit but not drastically and the other day somebody was saying that in a few years values would rocket. This was based on the fact that new house building has effectively halted so the demand is growing and the supply is staying the same or falling.

Don't know how true this is, just saying what I read. I do have a feeling that anything that can be said that might help to shore prices up will be said whether true or not so it might be bs.

reply to post by bigyin


Yeah but the average Brit can't afford to live in a house anyways. Look at Europe. Apartment living is the norm not home ownership. So it's a moot point. Home ownership is one of the foundations of a strong middle class and it's what made America what it is.....errrrr was. The UK has completely destroyed it's middle class. Look at London..........my god can any "normal" person even afford to live in that place? NYC is bad but London takes the cake.

Same thing with cars. Car ownership is usually reserved for the "priviledged" in the UK. It's like twice as expensive for people to own much less drive cars over there.


[edit on 3-2-2010 by Zosynspiracy]

reply to post by Zosynspiracy


You are currently living within your means. But if your jobs were to dry up thru no fault of your own and you found yourself unable to land a job paying more than min wage you too will be living beyond your means. you may feel you are immune in your current job, but so did millions of others that are now facing the true nature of our economy.

reply to post by Zosynspiracy


That is simplistic and frankly immature. You are highlighting a group of people who essentially speculated and lost money. OK. No different than the gent who left his store in Kansas to go the gold rush and not pan any gold.

I'll tell you a story 1000x more common than the broke mortgage broker.

I have a friend who is solidly middle class. Has a good job and his wife works (she's a nurse). Their kids reach middle school and while the elementary school in his area is OK, the middle school is a gang infested war zone. Just not an option. He has 4 young kids, so he can't afford private school.

He moves to a town where the schools are better. Of the towns that have better schools he moves to the least expensive one. Buys one of the cheaper homes at about $500K. He put a fair bit down, but the mortgage is a big nut for him, but he's making it and the sacrifice is worth it to get his kids a better education.

A sizable portion of his compensation is in the form of commissions. The economy tanks and his comp drops by about 45%. He can no longer afford the house. OK, he figures that he'll have to sell the home and move into a rental until things turn around. He can't sell the house because he's upside down on it by $150K.

His bank foreclosed on him. OK, now his credit is trashed and he can't even RENT a decent place because of the foreclosure.

Here is a family who played 100% by the rules. OK, you might say "he can move". Not that simple when you have elderly parents with health issues, etc.

Originally posted by Zosynspiracy

I'm an RN and .......... I decided to go into nursing for job security and the ability to help people and contribute something to society.

Respect to you

I trained as a Nurse, got a University Degree, took me 5 years to accomplish but at the end I was so knackered I didn't have the energy to actually do it as a job. I'm thinking of going back to it now as there are no other jobs.

Mind you working with women did my head in as well ... they are on a different wavelength.

I know it goes against the whole 'let the banks do what the heck they like' mentality that seems to be the way of the world, but what about enforcing some kind of limit - for a short time (perhaps ten years) - to the amount of interest than can be charged on mortgages? How about a 3% mortgage for ten years, and then we'll talk kind of thing?
That way more people could stay in their homes - which stimulates local economy and tends to beautify areas.
Unfortunately we've handed the whole system back to the guys who broke it (the banks) and we've given them some pocket money too.

I'm really not happy that the banks were writing 125% mortgages to people who had no right to get a loan. It was inevitable that those mortgages would default, and consequently everybody suffers. Those who had a standard mortgage, and made their payments on time, and qualified with excellent credit, have been punished too.