Negative Home Equity Statistics

[Neuling]

Negative equity is a financial perversion and should be forbidden by law.

[loves2read]

how can you forbid something driven by market demands--
although I have to say that some people are very adept at manipulating "the market" to benefit themselves and their niche market share--and I am thinking of Goldman Sachs in particular although that is not the only company to take advantage of their knowledge/market share vs other individuals'/companies--

normally no one can make a person pay more than what he/she deems fair value for something--
certain situations withstanding where there IS market control like a new drug under license vs one with generic counterparts--
there IS no guarantee about housing--prices could go down more in the future if there is a double-dip in the recession as some people are still predicting--

people seem to have lost sight of the idea that there is no "built in value" to property just because someone paid $XXX at some point in time --especially when they were racing to buy/profit from the upsurge in property values in some areas starting around 2000

real estate is a crap shoot in reality--there is nothing intrinsic about the value of property

[davery5872]

Originally Posted by loves2read

how can you forbid something driven by market demands--
although I have to say that some people are very adept at manipulating "the market" to benefit themselves and their niche market share--and I am thinking of Goldman Sachs in particular although that is not the only company to take advantage of their knowledge/market share vs other individuals'/companies--

normally no one can make a person pay more than what he/she deems fair value for something--
certain situations withstanding where there IS market control like a new drug under license vs one with generic counterparts--
there IS no guarantee about housing--prices could go down more in the future if there is a double-dip in the recession as some people are still predicting--

people seem to have lost sight of the idea that there is no "built in value" to property just because someone paid $XXX at some point in time --especially when they were racing to buy/profit from the upsurge in property values in some areas starting around 2000

real estate is a crap shoot in reality--there is nothing intrinsic about the value of property

As is everything. The only monetary value of an object is what some one is willing to pay for it.

[Harbor Hopper]

Originally Posted by Neuling

Negative equity is a financial perversion and should be forbidden by law.

I'm having a hard time making any sense out of this statement You buy something for $200k, and next year, due to market decline, it's only worth $175k, but you still owe $195k ($20k negative equity). How should this be "forbidden by law"???? Is the government supposed to step in and say "no, market, you can't do that!"
Negative equity doesn't necessarily mean that people have home equity loans.

[loves2read]

disgruntled investor maybe

[IamCheap]

Originally Posted by davery5872

As is everything. The only monetary value of an object is what some one is willing to pay for it.

I've read somewhere that prices reached bottom when mortgage payments, with about 25% downpayment, equal to rent.

[HenryHelmhazzard]

Originally Posted by IamCheap

I've read somewhere that prices reached bottom when mortgage payments, with about 25% downpayment, equal to rent.

Trying to understand what you meant here...

Are you saying that prices WILL reach bottom at some point in the future once mortgages with 25% down payments have monthly payments equal to market rent?

Or are you saying that prices have ALREADY reached bottom and the marketplace is already offering rent/mortgage equilibrium?

Or something else?

Thanks,

HHH

[HenryHelmhazzard]

Originally Posted by Neuling

Negative equity is a financial perversion and should be forbidden by law.

Financial perversion was 2005/6 when people were using their homes as ATMs with no ability to making good on their additional debt short of flipping their homes for gain in a rising market. I've seen first hand quite a few strategic defaults where people have run up HUGE equity loan debt on their residence, used the money to purchase a new home outright, homesteaded, then declared bankruptcy / went into foreclosure on their original "valuable" home. On the one hand, I admire their gamesmanship. Well played, if underhanded. On the other hand, I resent the fact that we're all stuck paying for their deception and a system that allowed it.

Some 7 Trillion in housing value has been destroyed so far (The Outlook for the Economy and Inflation, and the Case for Federal Reserve Independence (03/23/2010))... but the point some folks have made here is that value is not a constant ... as with Ebay, an object is only worth what the current marketplace is willing to pay for it. No more, no less, and no guarantees about what tomorrow will bring.

HHH

[IamCheap]

Originally Posted by HenryHelmhazzard

Trying to understand what you meant here...

Are you saying that prices WILL reach bottom at some point in the future once mortgages with 25% down payments have monthly payments equal to market rent?


HHH

I think you wrote it better!
I think we are almost there. Investors are buying up cheap properties and putting some downward pressure on rent, but the equilibrium will be reached at some point.
Right now, people with good downpayment maybe reluctant to buy if they can get cheaper rent...

[Neuling]

Originally Posted by Harbor Hopper

I'm having a hard time making any sense out of this statement You buy something for $200k, and next year, due to market decline, it's only worth $175k, but you still owe $195k ($20k negative equity). How should this be "forbidden by law"???? Is the government supposed to step in and say "no, market, you can't do that!"
Negative equity doesn't necessarily mean that people have home equity loans.

Well, yesterday I stumbled upon a headline on the underwater housing market or something like that. And I thought to myself, what the heck is that, underwater?! (I am a hardcore renter, so I have little knowledge of those things.) Then I searched CD for negative equity.
Anyway, when I read in the article what it means, I thought to myself that it is pretty odd to owe more than the home is worth. I mean, the home is not on the market, so who can tell and why does it matter in the first place what a home is worth, unless you want to sell it? And when you know its worth has decreased, why sell it? No stock broker does that.
So the only reason I can think of is that you lost your job and can't pay back the installments of the mortgage anymore. But in this case it does not really matter if the value stays the same as the installments stay the same (I assume they are absolute amounts determined in the contract, right?) And if they take your home away, whoever does so should have to pay you back what you have already invested so far, minus a certain usage fee if you will.
I don't even think it should be possible to take the home away from anyone who has already paid more than 50% (down payment and installments) of the original value, especially if the home is the only home that household owns. I don't like those companies who buy up foreclosed properties and speculate on them. I read the other day that this is very common in Detroit at the moment, companies from New York and elsewhere go there and buy cheap properties from desperate owners without selling or renting them to locals or anyone for that matter, just waiting.