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Originally Posted by bluedog2
At this point being under water is not necessarily because of a "sketchy loan". There are people under water who bought their houses in 2005 and put up 30% and 40 % downpayments and who have impeccable credit and high incomes.Unfortunately for them their houses are now only worth about 1/2 of what they paid.
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Quite correct.
The OP is a bit confused. 'Underwater simply means that the present market value of a home has fallen below the face value of the underlying mortgage.
Consequently, if the homeowner were to sell at market value, the proceeds from the saale would not be enough to payoff the mortgage.
Being 'underwater' has nothing to do with 'sketchy' loans, and all to do with buyers ppurchasing at the top of the market; and/or purchased at 'artificially' inflated prices FAR exceeding the 'real' and/or 'true' value.
Of course, this begs the questions, to what degree were prices artificially inflated, are present prices still inflated (artificially maintained), and what then is the 'true value'?
Quite complicated to answer, but if it is understood that prices were driven up by incredible 'demand', and that the demand was fueled by the (artificial) availability of money, that is easy obtainable loans (in other words 'free money'), then all one need do is look back to the market point/price immediately prior to the 'free money' era.
Lets say that the 'free money' period lasted 10 years, with NYC prices rising 85% in a matter of months during a point near the top of the market, and the market top occuring 2008/2009, then 'true value' is the market price of 1998/1999 or therebouts.
At minimum, 'true value' is 'top market value' less (minimally) the 85% run up which occurred in less than a year (I think that occurred in 2007, I can' recall the precise year).
By any logic or reason, 'true value' has to be even less. 85% plus the increase from that point (2007) to the 'top of the market (2008/2009).
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You might join them soon because it is predicted that the national "under water" rate could easily go to 50% in a few more years.
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This is what *should* occur if/when the government stops artificially supporting prices.
Just a quick segeway (spelling?), this is just one factor which the ignorant public dosn't get. Without the so-called 'bank bailout', Banks w/h been under extreme pressure to put the 'bad paper' underlying these mortgages, which they continue to hold, either to the market, in which case, the bad paper w/h been written down to 'real value' AND foreclosures w/h ocurred with extreme force.
As it is, the banks are sitting on the bad paper and NOT foreclosing on the properties underlyed by the bad paper. The foreclosures, to date, does not represent even 5% of the underwater mortgages.
There is a LOT more to this and even greater consequences, but the same idiots 'occupying wall street' resenting the bank bailout are too ignorant to comprehend or even imagine the consequences of not bailing out the banks.
The reality is that 'the banks' had NO CASH, and all their 'Capital' was LOCKED in the value of the 'bad paper', which everyone knew was worth a good deal less than face value. So, not only were the banks out of cash, but their Capital base has been greatly eroded.
Without the cash infusion, banks w/h been forced to find cash (recall during the period, bank heads hopping the globe, the saudis, the chinese, the russians, seeking investors with cash) by liquidating assets and dealing with the consequences. The 'Occupiers' don't realize that a host of people would lose. A number far exceeding the present unemployed and the consequent social issues. Without the bailout unemployment and the consequences w/b at a minimum of fivefold greater.
Yet, the idiots, march and protest to have their economic throats cut!
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Anyway, back on topic,
I don't know the specific numbers re Cobble Hill, but logic and reason dictates it to be relatively true. Just consider the average 'present value' against 'top of the market value', then the number of purchases completed at or near 'top market value'.
That is the number representing the largest portion of those underwater in NYC. It hasn't become a 'media' issue yet, as NYC has been hit the least with unemployment and income erosion/deflation. Unlike FL and CA, where prices have not fallen to such a degree compeling people to walk away or short sell.
Also, most significantly, people, at present, continue to have the income to make their mortgage payments on mortgages which are only slightly underwater. As well as, people still have ***confidence*** in the market.
Of course, it is just a matter of time, when the above reverses itself. Soon, I believe. Especially so if the 'occupiers' get their way and 'wall street' is prevented from *profiting*. This would lead to lowered profits, layoffs, lowered bonuses, and a lowered economic outlook---meanong lowered 'confidence'; and, I'm just talking about NYC and the region.
Such a scenario, which is already in motion, will be the deathknell for NYC realestate!
Wall Street’s troubles--Charles Gasparino - NYPOST.com