Nearly 1 in 6 Homeowners Underwater

Here's the central problem in the credit crunch that has gripped the world. Housing prices keep falling and the news doesn't get any better. The WSJ just published an article that says that 1 in 6 homeowners owe more on their mortgage than their home is worth.

Here's the central problem in the credit crunch that has gripped the world.  Housing prices keep falling and the news doesn't get any better.  The WSJ just published an article that says that 1 in 6 homeowners owe more on their mortgage than their home is worth

"The result of homeowners being "under water" is more pressure on an economy that is already in a downturn. No longer having equity in their homes makes people feel less rich and thus less inclined to shop at the mall.

And having more homeowners under water is likely to mean more eventual foreclosures, because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds the home's value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood.
 
About 75.5 million U.S. households own the homes they live in. After a housing slump that has pushed values down 30% in some areas, roughly 12 million households, or 16%, owe more than their homes are worth, according to Moody's Economy.com."

Until this has run its course nothing the governmnet does will really solve the problem.  The bubble has burst.

Of course, there is a bright side.  If you are a first time buyer or were wise enough to wait out the housing bubble, you'll get a much better price on a house.  You just need to make sure you can get a mortgage.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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Comments

  • JRodgers

    October 08, 2008

    We are going to 1 in 2 quickly.

  • thedorightman

    October 17, 2008

    GLUB....1/2 price real estate...oh boy!

  • thedorightman

    October 22, 2008

    The best info. on the complete Tsunami of defaults to come in the future, is on the Credit Suisse website.
    If the market is waiting for the real estate game to march us out of this recession, it will be like waiting for Elvis to return.

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