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I was shocked ,when watching ABC News last night, to learn that 10% of all house mortgages in the US are for higher amounts than what the house is worth.
The report stated this hasn't been the case since the great depression of 70 years ago.
This news tells me bankers are going to get stricter and some people selling are in a rough situation cuz they don't have much room to lower their prices for a sale. Those two are going to complicate an already slow real estate market.
On the positive side, I sure don't see as many ads on TV urging people to "cash in the equity" on their houses by finance companies.
"This news tells me bankers are going to get stricter and some people selling are in a rough situation cuz they don't have much room to lower their prices for a sale. Those two are going to complicate an already slow real estate market."
I was shocked ,when watching ABC News last night, to learn that 10% of all house mortgages in the US are for higher amounts than what the house is worth.
On the positive side, I sure don't see as many ads on TV urging people to "cash in the equity" on their houses by finance companies.
This should be absolutely no surprise and, I believe, has been what has caused most the problems we have today. I believe that these are mostly from all the refinancing that has been done for many years, not only from the adjustable rate mortgages that's getting all the blame today. "Borrow 110% of your homes value", "pay off your credit cards with a home equity". With that last one being my pet peeve. It was really a great idea for people paying 18% and more to pay off their credit cards with a low interest home equity. Problem was they didn't have to close all the paid off accounts. It wasn't long before these people that took advantage of this, created even more debt than they had before by running up the credit cards again. Now they have a higher home loan than they had before, and now they have the credit card payments again. Now they can't make ends meet again but don't have anymore room to borrow on their home, now they're skipping payments. They need to downsize, but can't afford to sell their home because they owe 110% of what it's worth. They don't have the extra money to bring to closing, and the cycle goes on.
Like you said, there is the positive side to look forward to.
I saw the reports and was dismayed as it was misleading and putting further fear in the market.
First of all, Real Estate is local not all markets are seeing this.
Second, this only effects the people who are trying to refinance or sell.
Third, they did not quanitify the 10% - 10 up for 0 is 10%
I wasn't around during the depression but I do know I bought my first home at the end of the cycle in 95 when there were plenty of foreclosure and short sales. Knew then it was a great time to buy and see it again today.
Finally, we never hear figures like, 35% of homes are owned out right, or 50% of homes fixed rate mortgages - leaving us with 15% of the population having adjustable rates and half of those are high-income earners, so that leaves 7% of the market only subject to rate increases.
I would much rather here from the media 93% of the market is not affected by the down turn
I saw the reports and was dismayed as it was misleading and putting further fear in the market.
First of all, Real Estate is local not all markets are seeing this.
Second, this only effects the people who are trying to refinance or sell.
Third, they did not quanitify the 10% - 10 up for 0 is 10%
I wasn't around during the depression but I do know I bought my first home at the end of the cycle in 95 when there were plenty of foreclosure and short sales. Knew then it was a great time to buy and see it again today.
Finally, we never hear figures like, 35% of homes are owned out right, or 50% of homes fixed rate mortgages - leaving us with 15% of the population having adjustable rates and half of those are high-income earners, so that leaves 7% of the market only subject to rate increases.
I would much rather here from the media 93% of the market is not affected by the down turn
Remember to always look at the big picture.
I saw the report and was too dismayed by it. Our local real estate market is one that is NOT seeing such downturns. We still have buyers out there that are HAVING to pay top dollar IF they want a house in a good area. Those houses are NOT a dime a dozen. As you said real estate is LOCAL!!! Right now there is 1 house for sale in my area that has only been on the market for 2 weeks and had multiple showings. Yesterday one of those buyers came back for their THIRD VISIT!!!! Haven't heard from the friends if they wrote a contract but I'd assume after 3 visits in 1 week one is likely. If they sell and it is close to their listing price it will set a new "high" record for our neighborhood. I'd hardly call that a "downturn" or a market that is crashing.
I'd also like for the media to point out that of ALL of the houses in the country how many are NOT FOR SALE? Why are these people that ARE putting their house on the market selling? If they don't HAVE TO MOVE then why sale and take a loss? This "loss" is ONLY ON PAPER!!!! As I read in one of our local publications about our local real estate market if one is buying a home to use it as such and to live in it for 10 years then it is a good investment. Too many people are unknowingly getting on this train of "gotta sell to cut my loss" and not realizing they really haven't lost a thing. Stay put and ride it out. The people that stay the course and ride out the rough times are always ahead of the game at the end. Just as I don't buy stocks to make a killing in a year or two as I'm more interested in the "LONG TERM" I don't buy a house to make a killing on it in 1-2 years. My home is my home.
I saw the reports and was dismayed as it was misleading and putting further fear in the market.
First of all, Real Estate is local not all markets are seeing this.
Second, this only effects the people who are trying to refinance or sell.
Third, they did not quanitify the 10% - 10 up for 0 is 10%
I wasn't around during the depression but I do know I bought my first home at the end of the cycle in 95 when there were plenty of foreclosure and short sales. Knew then it was a great time to buy and see it again today.
Finally, we never hear figures like, 35% of homes are owned out right, or 50% of homes fixed rate mortgages - leaving us with 15% of the population having adjustable rates and half of those are high-income earners, so that leaves 7% of the market only subject to rate increases.
I would much rather here from the media 93% of the market is not affected by the down turn
Remember to always look at the big picture.
whenever defaults increase by as little as 1%, the absolute amount is ENORMOUS and well into the billions. I don't think that the banks who hold mortgages would subscribe to the rosy picture you paint. Defaults increasing by 10 or 20% of conforming loans would likely cause Fannie and Freddie to go bankrupt (no the taxpayer if not forced to keep them in business as others might think, the taxpayer just makes good on some/most/all of the existing bad debt).
Can you imagine the price drops we'd experience without a government sponsored entity buying up mortgage debt? You can forget about single digit rates, and likely any rate starting with a "1" either.
If anything, the media is downplaying the potential issues and the tin foil hat theory the media is somehow responsible for the fundamental problems with bad mortgage debt and the resulting depreciating "values" is almost laughable.
Last edited by ViewFromThePeak; 02-23-2008 at 12:24 PM..
I saw the report and was too dismayed by it. Our local real estate market is one that is NOT seeing such downturns. We still have buyers out there that are HAVING to pay top dollar IF they want a house in a good area. Those houses are NOT a dime a dozen. As you said real estate is LOCAL!!! Right now there is 1 house for sale in my area that has only been on the market for 2 weeks and had multiple showings. Yesterday one of those buyers came back for their THIRD VISIT!!!! Haven't heard from the friends if they wrote a contract but I'd assume after 3 visits in 1 week one is likely. If they sell and it is close to their listing price it will set a new "high" record for our neighborhood. I'd hardly call that a "downturn" or a market that is crashing.
I'd also like for the media to point out that of ALL of the houses in the country how many are NOT FOR SALE? Why are these people that ARE putting their house on the market selling? If they don't HAVE TO MOVE then why sale and take a loss? This "loss" is ONLY ON PAPER!!!! As I read in one of our local publications about our local real estate market if one is buying a home to use it as such and to live in it for 10 years then it is a good investment. Too many people are unknowingly getting on this train of "gotta sell to cut my loss" and not realizing they really haven't lost a thing. Stay put and ride it out. The people that stay the course and ride out the rough times are always ahead of the game at the end. Just as I don't buy stocks to make a killing in a year or two as I'm more interested in the "LONG TERM" I don't buy a house to make a killing on it in 1-2 years. My home is my home.
This is true, but as the masses get fed up with the inability to move because of highly depressed prices, they would likely abandon an upside down home, then the resulting boarded up homes start becoming a blight on the neighborhood. I don't profess to know how your area would fare, but would you continue to live in a house, even paid for in cash, when every 1 out of 3 houses in the development are abandoned?
whenever defaults increase by as little as 1%, the absolute amount is ENORMOUS and well into the billions. I don't think that the banks who hold mortgages would subscribe to the rosy picture you paint. Defaults increasing by 10 or 20% of conforming loans would likely cause Fannie and Freddie to go bankrupt (no the taxpayer if not forced to keep them in business as others might think, the taxpayer just makes good on some/most/all of the existing bad debt).
Can you imagine the price drops we'd experience without a government sponsored entity buying up mortgage debt? You can forget about single digit rates, and likely any rate starting with a "1" either.
If anything, the media is downplaying the potential issues and the tin foil hat theory the media is somehow responsible for the fundamental problems with bad mortgage debt and the resulting depreciating "values" is almost laughable.
Of course the media is not causing the problem, but they are not helping by any means and not telling the whole story and the consumer responds to fear!.
The consumer does not hear that the majority of these financial companies still have surprisingly strong cash flows and continue to pay big dividends. There is a small window that they can write off all this bad debt, which they are doing. Since the market has already driven down their share prices, they have very little to loose by writing off any potential bad loan and bad business which is all lumped together with other things such as leasing contracts, (not all mortgages).
I do believe banks would agree they are seeing turmoil in the market which has largely due to an over reaction.
I saw the reports and was dismayed as it was misleading and putting further fear in the market.
First of all, Real Estate is local not all markets are seeing this.
Second, this only effects the people who are trying to refinance or sell.
Third, they did not quanitify the 10% - 10 up for 0 is 10%
According to the OP, it's 10% of all mortgages period. It's not an increase of 10%, it's 10% of the outstanding mortgages are now for more than the house is worth.
And if you think that this only effects people trying to sell, you haven't been listening to what the mortgage companies have been saying recently -
I wasn't around during the depression but I do know I bought my first home at the end of the cycle in 95 when there were plenty of foreclosure and short sales. Knew then it was a great time to buy and see it again today.
The down turn that you're talking about lasted nearly a decade. The current downturn started in about 2005. Why is this one going to be so much shorter?
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I would much rather here from the media 93% of the market is not affected by the down turn
Where do you get this number from? Do you have any data on the number of fixed rate mortgages defaulting versus variable rate ones? I have seen numbers that show that 2007 loans are defaulting at a higher rate than 2006 ones, so it doesn't seem that rate resets are the only problem (2007 loans are too new to reset yet).
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