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"Negative equity is the best predictor for loan defaults, said Sam Khater, a senior economist for First American. Still, “a majority of people who are underwater probably will not default,” he said, “because if you have your job and don’t encounter economic shock, you’ll most likely keep paying on your home.”
As long as they plan to stay in their house for a while, people can wait for home values to level out.
As the article suggested, that is what most people will do. But it does stop the mobility of a lot of people who have negative equity. If push comes to shove, some of these people will bail on their mortgage.
When you understand all of the ins-and-outs, it makes sense why the 1st time buyers are out in full force. They are catching the deals on the lower priced homes and they are not tied to another home.
First, Florida has seen an outmigration of 50,000 people due to the recession, which obviously slightly shrinks the base of potential RE customers. I wonder how many have just walked away from their homes?
But looking nationally, Mortgage delinquencies (http://www.builderonline.com/loans/mortgage-delinquencies-hit-record-high-in-q2.aspx - broken link) have hit a record for the second quarter of 2009.
Salient quote from the above article:
"More than 13 percent of American homeowners with a mortgage are either behind on their payments or in foreclosure as the recession throws more people out of work, the Mortgage Bankers Association said Thursday."
So all this taken together will no doubt cause more people to end up underwater.
First, Florida has seen an outmigration of 50,000 people due to the recession, which obviously slightly shrinks the base of potential RE customers. I wonder how many have just walked away from their homes?
But looking nationally, Mortgage delinquencies (http://www.builderonline.com/loans/mortgage-delinquencies-hit-record-high-in-q2.aspx - broken link) have hit a record for the second quarter of 2009.
Salient quote from the above article:
"More than 13 percent of American homeowners with a mortgage are either behind on their payments or in foreclosure as the recession throws more people out of work, the Mortgage Bankers Association said Thursday."
So all this taken together will no doubt cause more people to end up underwater.
Seems logical to me. The PMI Group says the same thing.
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