http://biz.yahoo.com/rb/090304/business_us_usa_mortgages_study.html One in five U.S. mortgage borrowers are underwater Wednesday March 4, 8:55 am ET By Jonathan Stempel NEW YORK (Reuters) - One in five U.S. homeowners with mortgages owe more to their lenders than their properties are worth, and the rate will increase as housing values drop in states that have so far avoided the worst of the crisis, a new study shows. About 8.31 million properties had negative equity at the end of 2008, up 9 percent from 7.63 million at the end of September, according to the study, released Wednesday by First American CoreLogic. The percentage of "underwater" borrowers rose to 20 percent from 18 percent. Another 2.16 million properties could go underwater if home prices fall another 5 percent, the study shows. First American said the value of residential properties fell to $19.1 trillion at year-end from $21.5 trillion a year earlier, with half the decline in California. Forty-three U.S. states and Washington, D.C., were included in the study. While states such as California, Florida and Nevada were particularly stressed, the study showed worrying signs of deterioration in relatively healthy parts of the nation. "The economic slowdown is broadening," said Sherrill Shaffer, a banking professor at the University of Wyoming at Laramie and a former Federal Reserve official. "As more people lose jobs, it will be more difficult to sustain the levels of pricing and home ownership, and that is a big factor driving down housing prices in more parts of the country." Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio remained the most stressed states, with 62 percent of underwater borrowers and just 41 percent of mortgages. Other areas, though, also face more stress. Connecticut, for example, saw a 25 percent increase in homes with negative equity, while Washington, D.C., had a 44 percent increase. "Even I continue to be surprised at the tentacles of this financial and economic debacle," said Robert MacIntosh, chief economist at Eaton Vance Management in Boston. "More people are being laid off, resulting in reduced income and therefore less consumption. That leaves fewer people with money to buy homes, and the mentality is that people believe they should wait six months rather than buy now. Less demand means falling prices." Roughly 68 percent of U.S. adults own their own homes, and about two-thirds of these have mortgages. Many economists expect the nation's unemployment rate to rise above 9 percent before the recession ends, up from January's 7.6 percent. CALIFORNIA, NEVADA UNDER STRESS California had 1.9 million borrowers with negative equity at year-end, more than any other state, followed by Florida's 1.28 million. About three in 10 borrowers in both states were underwater. By other measures, Nevada was the most stressed, with 55 percent of owners having negative equity and borrowers on average owing 97 percent of what their homes are worth. About 28 percent owe more than 125 percent of their homes' value. Michigan had 40 percent of its homeowners underwater, while Arizona had 32 percent. New York fared best, with just 4.7 percent of borrowers with negative equity and an average 48 percent loan-to-value ratio, though this could change as employment and bonuses slide in the financial services industry. According to the S&P/Case-Shiller Home Price Indices, prices of U.S. single-family homes slumped 18.5 percent in December from a year earlier, the biggest drop in the 21-year history of the data. Many lenders are taking steps to keep borrowers out of foreclosure. The Obama administration has backed legislation that could broaden powers of bankruptcy judges to modify mortgages for troubled borrowers. Among major lenders, only Citigroup Inc has supported such a plan. MacIntosh expects housing prices to keep falling until "well into" 2010. "There is no magic bullet or magic arrow here," he said. "It is a question of trying to come up with ideas and seeing what happens. It could take a long time." First American CoreLogic is an affiliate of title insurance and real estate services company First American Corp. (Reporting by Jonathan Stempel; Editing by Bernard Orr and John Wallace)
I never said it did, oh lack of reading comprehension skills dipshit. Don't you have a -90% paper traded index to tend to?
Obama's housing plan isn't going to help a lot of these people...and even those who do get relief, it will only be for a little while especially if values drop more on top of that. Just wait until the 5 & 7-year ARM'S start resetting in 2010 & '11...by 2012 this could be even more perfect of a storm then what we got now.
There is a movie coming out about the final rash of ARM resets hitting in 2012! http://www.sonypictures.com/movies/2012/ :eek:
The average cost of a house between the years of 1979-1987 was around 140k inflation-adjusted. Between the years 1988-2000 the average cost of a house was around 150k. 2003 housing prices were at 195K. 2005 housing prices were at 238K. At the peak in 2006 prices were at 265K. And you wonder why there is a credit crisis? The US median house price was 180K in the fourth quarter of 2008. We still have at the least 30K still to fall.
You mean, we have to fall 30k "inflation-adjusted" ? Average house prices in Europe : http://de.statista.com/statistik/daten/studie/2491/umfrage/preise-fuer-einfamilienhaeuser-in-europa/
Other than supply and demand, home values are influenced by three other things. 1. Incomes 2. Interest Rates 3. The quality of mortgages available. So what has happened to the above? Interest rates are being artificially kept low - for now - and who knows for how long. Incomes and jobs are plummeting. This is the result of globalization (outsourcing and H1B Visas) and a major correction in the FIRE economy. Exotic mortgages are dead. No more Californians buying mcmansions with option arms. Now ask yourself. Is the above an isolated event and things will go right back to where they were in 2005? Will option arms and other subprime and ALT A loans come back, will the FIRE Economy bounce back? Will Chinese and Indian workers get incomes commensurate with Americans anytime soon - thus bringing jobs back to the US? Or is all the above a trend. If it is a trend - how much further will it go? I think the answer is obvious - it is an irreversible trend and we have a long way to go. Expect many many more foreclosures. Corporate elites thought that this gravy train would last forever. They didn't realize that American Incomes (wage inflation) was not always a bad thing. They wanted low wages and high asset (homes and stocks) values. Can't have both.
Couldn't agree more. Subprime is history. Thousands of people that were able to buy in the past won't be able to going forward. They don't have the credit or the equity that lenders will demand. In essence at least 30% of all demand during the boom has evaporated. Now couple that with a weak economy and its even more pronounced. Attached is an interactive map of the US showing the % of subprime loans. Click on state...keep clicking and you can narrow down to each county. Some of the numbers are pretty high. http://www.nytimes.com/interactive/2007/11/03/weekinreview/20071103_SUBPRIME_GRAPHIC.html#