Property crash pushes third of US homebuyers into negative equity

[Bangkoktraveler]

The US property market has collapsed with such ferocity that almost a third of homebuyers are trapped in negative equity with mortgages outstripping the value of their homes.

 

House prices in the US are plunging at their fastest rate for 12 years, leaving millions of people struggling to meet home loans often provided by unscrupulous lenders after making minimal checks on the suitability of borrowers.

 

Among Americans who bought homes since the beginning of 2003, some 29.1% are in negative equity according to research by Zillow.com, an online specialist in house values. For those who bought in 2006, as many as 45% have mortgages under water in comparison to the sale value of their property.

 

"For homeowners who need to sell, this is a gravely serious situation," Stan Humphries, Zillow's vice-president of analytics, told Bloomberg News.

 

"It can also be harmful to communities where the number of unsold homes adds more houses to inventory and puts downward pressure on prices."

 

The latest figures on house prices showed a year on year drop of 9.9%.

 

Worst hit are previously booming areas such as Los Angeles, where prices are down 27%, and Las Vegas, which has seen a drop of 21%.

 

Citigroup's housebuilding analyst, Josh Levin, yesterday predicted that property prices could continue falling through 2010 and possibly 2011.

 

One of America's largest mortgage finance companies recently forecast that prices would drop by between 18% and 20% from "peak to trough" in the current downturn.

 

Freddie Mac said the US property market was in its most dismal condition since the great depression of the 1930s.

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[jonjon058]

Why is this considered a bad thing? I own a house and think it is fine if prices drop. It means that I can more easily afford to buy a house that is twice as expensive as the one I currently own. Not only is it more affordable but I come out even in terms of how much money I lose on my current home and how much I saved on the next bigger place. Those retiring and downsizing still have a huge gain over what they originally paid for their home. Those starting out have an easier time affording a place. The only real losers are the people who speculated in property with money they didn't have.

[Bangkoktraveler]

One woman I know, bought a house for $500,000 a few years ago. The house is now worth $300,000. She decided to take her lost and walk away from the house. The mortgage companies took a hit. This in turn makes it harder for others to borrow and causes interest rates to increase. Bottom line: nobody wins. The dollar is worth less then it used to be. Whose fault is that?

[Neo]

House prices need to go down a lot more. The median income isn't enough for mortgage payments. I don't see how this can be sustained. The article using the word "collapsed" to describe the market is ridiculous. House prices are higher than they were only a few years ago. A third of a million dollars used to buy a mansion, now it gets a crap house someone bought for a song.

 

[Central Scrutinizer]

I, for one, am happy to see the bubble burst. People buying/having bought a house to actually live in need not worry about this negative equity. It will balance out as long as they hold onto their home, and eventually rise at a more realistic rate over the years. The speculators made this mess, the banks as well, not honest homebuyers looking for a place to live. What pisses me off is that the feds will bail out these assholes that made the mess to begin with, and at the expense of the average taxpayer. It has all been a huge money-making scam at the expense of the average American homeowner and taxpayer. Yet again. Allowed by the federal government, which has been in the control of the Rebulicans mostly for decades while this get rich quick scheme has flourished to the detriment of the American public for the enrichment of the few.

 

Cent

[Barry]

I, for one, am happy to see the bubble burst. People buying/having bought a house to actually live in need not worry about this negative equity. It will balance out as long as they hold onto their home, and eventually rise at a more realistic rate over the years. The speculators made this mess, the banks as well, not honest homebuyers looking for a place to live. What pisses me off is that the feds will bail out these assholes that made the mess to begin with, and at the expense of the average taxpayer. It has all been a huge money-making scam at the expense of the average American homeowner and taxpayer. Yet again. Allowed by the federal government, which has been in the control of the Rebulicans mostly for decades while this get rich quick scheme has flourished to the detriment of the American public for the enrichment of the few.

 

Cent

I completely agree with this. And it's not just the US, but much of the Western world. Things are returning to their natural state. A few people are fucked up by it, but them's the breaks.

[Old Hippie]

House prices need to go down a lot more. The median income isn't enough for mortgage payments. I don't see how this can be sustained. The article using the word "collapsed" to describe the market is ridiculous. House prices are higher than they were only a few years ago. A third of a million dollars used to buy a mansion, now it gets a crap house someone bought for a song.

 

 

Exactly right. Neo, I have no idea where you are, but here in the bay area, $750,000usd gets you a shit 2 bedroom 1 bath house...er *maybe*. It is just way out of line.

 

I say good that home prices are dropping, and in a way, fuck the greedy bastards and other shits who drove the prices high, hoping to "get rich quick." The bad part is, we have even more foreigners cumming over, exploiting the weak dollar, and buying the place up...pimped our country out we did.

[Bangkoktraveler]

Were I live in Arizona, we have a considerable number of homes that are in bankruptcy. A few were bought by investors but most of them were bought by young families. They were able to buy the homes with very little, if any money down. In many cases the homes needed some work, so they would put the charges on such cards as Lowes and Home Depot believing they would refinance the house after the work was done because the house would be worth more. When they went to refinance, they found out their homes were worth less then what they owe on the house. This meant they could not get refinancing.

 

How this problem with houses got this way is a complicated maze. One of the problems was the bsnkruptcy laws were changed in 2005 to favor the credit card companies and other lenders. The credit card companies and other lenders thought they would be protected better under the new bankruptcy laws, but they didn't count on people just walking away from their homes. Another problem is there are fewer places to turn to who will actually do something unless you have a lot of money. For example, the State's Attorney General'd office generally doesn't do much because they claim they don't have the budget to do it. But if they did do something and levied stiff fines, the AG office could be self supporting. This lack of regulation caused some lenders to break existing laws so as to make more money. They realized they would not be prosecuted.

Another factor is the USA dollar because worth less. The borrower generally wasn't aware that the dollar had droped in value.

Then there is the rapid ramp up in the cost of a gallon of gas, groceries have risen, etc.

 

 

 

 

[Barry]

And people criticise Thailand for not letting foreigners screw about with their property market.

[The_Munchmaster]

What a stupid post.