Nearly 20% Of Homeowners Owe More On Mortgage Than Their Homes Are Worth

Wall Street Journal:

UPDATE: [This Wall Street Journal story has been updated from an earlier version due to a clerical error on the part of the group that conducted the study.]

The downturn in home prices has left nearly 20% of U.S. homeowners owing more on a mortgage than their homes are worth, according to one new study, signaling additional challenges to the Obama administration's efforts to stabilize the housing market.

Read the whole story: Wall Street Journal

Comments

[DebnJosh]

An important bill just passed in the senate that may actually help some homeowners­...we will see.

[KQuark]

Do you have a link?

[DebnJosh]

Check out the United States Senate website. Look under the "Helping homeowners" bill. It is all there.

[citizensrus]

Are most of the people on this thread Republicans or Libertarians?

[KIVPossum]

50% of peopel with a loan on their car are upside down. So what? They drive the car and make payments on it. Eventually they hold hte title. Same for the homeowners - is it really important if they own more than the value? A home should be a choice of lifestyle; a place of residence, permanence, security. Not an investment to cash in on when you need money for vacation or to pay off the credit cards.

Perhaps these under water owners should have held on to their previous homes and not traded up during the peak of the housing bubble.

I have no sympathy for them at all.

[signwrite]

yesterday it was one in three or 30%, today its one in five or 20%..... what will it be tomorrow?

[thnk4selfagain]

I also noticed that the headline was changed last night...

[TruepatriotinRI]

Yet my property taxes remain at the same level based on the evaluations at the market peak!

[aweissnet]

Funny how that works! Get a reassessment?

[SammyD]

How often are your properties assessed for value? You can ask for a review if your county permits.

[Chicago48]

Real estate agents and mortgage lenders are still in business, just not as many of them.

You should come to the north side of Chicago, my neighborhood. Brand new condos sitting 1/2 empty. Beautiful, with a price tag of $300K for 2-3 bedrooms. Nobody's buying them, the developers have to rent them to students. But they're still 1/2 empty.

They rent them for $2000 a month to try and cover their deficit. So 2-3 college students go in and get a new rental condo. But they can't sell the stuff, nobody's buying and the college students & parents don't have the money to buy. I walk by these condos every day. Look at the mailboxes. 1/2 empty condos.

Soon, if they can't sell, they will be in foreclosure.

[aweissnet]

Yes, well owners are r@ping people are rent today. That's not fair either.

[aweissnet]

on rent. not are rent.

[Chicago48]

People -- stop using your house as an investment and piggy bank. For decades we were told by the Govt and lenders that you could refinance, get money out of your house -- those days are over. A house is for living in and passing down to your children as an asset.

[vegasobserver]

I wanna refi again so I can get 3 more home equity lines of credit -- to build that new deck, buy a new camper, and get the kids surfboards for college!

[aweissnet]

You're calling it an asset--this contradicts that it is simply something to live in, and agrees with the principle that is an investment and thus a piggy bank.

It is NOT an investment, and therefore, NOT an asset. You're paying rent, every single month, to the banks. And maybe one day you'll own it, and one day you won't. It's a risk, or a liability, today.

If you can't buy it outright, it's not an investment. And if you can buy it outright, you're risking your money in an iffy market.

[The-Gentle-Art]

I am so tired of politicians telling me they want to cut taxes so I can keep more of my money. Taxes should be the least of our worries according to this article.

Criminals in the credit card industry keep me from having more of my money, but what about front-loaded mortgages? I know it is been this way forever, but does that make it right that mortgages companies require a homeowner to pay all of the interest up front, rather than spreading it out? I have to say that I agree 100% with "Che" here.

http://progressnotcongress.org/blog/?p=761

[Chicago48]

the problem is that politicians & lenders told people to buy houses and "flip" the houses for profit, or refinanance and use for a piggy bank. That was the problem, and that's what people did. When I was growing up, you bought a house to live and die in; and you passed the house onto your children.
Peeps need to stop thinking like Trump and the Rich Dad guy and buy a house to live in again.

[aweissnet]

Lots of these homeowners, are simply, people who wanted to own homes. To live in and die in. The market bombed, they were overvalued, and now they are stuck.

[Sundialsvc4]

If "20% of homes are priced at more than 'what a willing buyer would pay a willing seller today,' " then my Basic Accounting 101 tells me that the bank's collateral has been reduced by 20%. The homes are no longer liquid assets. The balance-sheets of the banks have become insolvent.

Furthermore: if the banks attempted to get out of this obligation by selling-off the mortgages as securities (which they did), then they undoubtedly committed securities fraud ... with a little help from Moody's, which by its actions ALSO committed securities fraud.

How many times do we have to repeat that "20-odd mega banks have committed an endless litany of financial crimes, and a gang of Members of Congress committed high crime to help them?" Crime is not rocket-science. We know exactly what it looks and smells like. I, for one, refuse to live with it.

[linton]

The real estate value problem is not going to go away anytime soon.
My next door neighbors dumped their house on the market yesterday. I found out that they paid $390,000.0­0 for it about 3 years ago. I am one of the original residents and we paid approximately $210,000.0­0 for ours 7 years ago. The homes are currently selling around their original or initial prices. I know about 3 people who moved out of their homes because their banks refused to negotiate their rates. They have all since bought new homes comparative to what they had at lower or better prices with sensible mortgage payments.

[learntofly]

It's unfortunate that so many in our country, and we're all guilty to some degree in some areas of our life, have become so impulsive with major decisions such as our largest purchase, our home. I'm still seeing similar things as you described scattered throughout my neighborhood. My next door neighbors are in debt. He is now gone from full time to part time temping, but they somehow found a loan to start putting in a huge bricked in patio (big as the house) with all the built ins - kitchen and grill. There are two other houses on my street that are up for sale at 2002 prices for this neighborhood.

As soon as this market stabilizes, I'll be more than ready to move to a cheap hole in the wall so the risk can be mitigated a lot better.

[inorbit]

I have friends who have a conventional 30 year mortgage and a home equity loan for some very necessary remodeling on a modest house in a modest suburban neighborhood. They are now underwater because of the drop in home values in their neighborhood - not because they did anything wrong. I am so mad at these banks that have screwed over so many honest people who are paying their bills and just trying to live in a decent house! I'm hoping that by the time they decide to move (fortunately not in the near future) that the housing values will go back up in their neighborhood and they can get what they deserve to get for their house.

[VoteLibertarian]

How is it the banks fault that their home value dropped. if you are in a 30yr fixed mortgage, and are paying your bills...ho­w can you be underwater, unless you are trying to sell?

[VoteLibertarian]

Predatory lending sucks, lets get that out of the way...but if people are about to make the biggest purchase of their lives, and decide to do no research and sign on to a major risk that a bank throws out there, how do we not blame this mostly on the consumer?.­..ultimate­ly you sign or you don't

[tomasedison]

they get poor advice from banks, mortgage brokers and real estate agents

[VoteLibertarian]

so, because get poor advice in life...the rest of us should continue to pay for the corrections of people's actions? Advice is advice, not a gun to your head.

[citizensrus]

So much for good faith. What you are saying is that predatory lending sucks but it's not their fault that the consumer trusted them.

[just saying]

Exactly...­there will always be snake oil salesmen. You have to have the common sense to do your homework and know what you want, and not expect govt to fix it if you don't.

[DFL]

More hard times in the bush depression.

[rsaillant1]

Well, here's a bulletin for you..

Everyone who buys and finances a new car owes more for it than it's
worth when they drive it off the lot.

The only people who are overly concerned about being "upside-down"
on their mortgage are those who jumped in to turn it, and make a quick profit.

Those who purchased a home for the long haul will do just fine.

[Deaninphilly]

Exactly. I love hearing the complaints that my home isn't worth anything and now I can't sell it. My question always is then why did you just buy it a few years ago? If you didn't intend to live in it for years to come then you shouldn't have bought it. Once you keep asking the question you get the real answer they bought it. To use it as an ATM to flip it.

[HottBrainsJill]

What about the people like me who purchased a condo to live in for only a few years to avoid throwing money down the drain by renting? I didn't purchase to flip - the condo is brand new. But now I'm stuck forever unless I want to take a loss. Wah wah wah :)

[OneFluOverTheWooWoosNest]

BINGO!

[Chicago48]

That's one reason why people don't want to buy a new car: depreciation. It's better to buy "certified" used.

[jadeba]

Agree. Just got my property valuation, we're down to about 10% above our original purchase price 10 years ago. In the artificial boom, we'd been up almost 100% - that's what was not realistic. Personally, as I have no intention of moving - ever - it's welcome news as our taxes will accordingly go down for the next two years. I'm not complaining. We never regarded our home as a piggy bank, didn't buy more than we knew we could afford and put a lot down. So, a lot of folks lucky enough to buy in pre boom times will actually benefit. I feel for those who bought when prices were so inflated.

[leftcoastindy]

The only people who are overly concerned about being "upside-down"
on their mortgage are those who jumped in to turn it, and make a quick profit."

Unless they lose their job!

[PhilipTaylor]

BIG NEWS IMF Flood Asia and in particular Domestic Demand- Maybe Obama will Help Main Street?

IMF calls for Asia to 'flood' banking system, cut interest rates

Report marks drastic about-face from earlier advice during the last crisis

MarketWatch May 6, 2009

HONG KONG - Asia Pacific nations should flood their banking systems with liquidity and actively support credit growth using unconventional monetary policy and accommodative fiscal policy, IMF said Wednesday.

The global financial body urged the measures as part of a "forceful" strategy to last through next year in efforts to counter the effects of the global crisis.

The IMF also called for a refocusing upon domestic demand and away from exports as a source of economic growth, noting that consumption in the key export destinations of the U.S. and Europe could remain weak for years to come.

The measures, it said, were needed to counter an "astonishing" economic contraction in the poorest nations in the region, excluding China and India, in which gross domestic product fell a seasonally adjusted 15% during the fourth quarter.

The IMF made the recommendations in its Regional Economic Outlook, released Wednesday in Singapore.

"The spillovers from the global crisis have impacted Asia with unexpected speed and force," the report said. "The downswing has been even larger than in other regions, and sharper than at the epicenter of the global crisis."

http://www.marketwatch.com/news/story/IMF-calls-Asia-flood-banking/story.aspx?guid={9EEBE59C-CF9F-4ED9-81A2-5C545CE65528}

[Carolab]

In the Financial Times in 2007, former Council on Foreign Relations economist, C. Fred Bergsten, laid out a global financial crisis management scenario that calls on the International Monetary Fund to absorb the flood of dollars that are looking for safety outside of the United States.

Depositors would be issued instruments called SDRs (Special Drawing Rights), which the IMF defines as, “an an international reserve asset,” comprised of a, “basket of currencies, today consisting of the euro, Japanese yen, pound sterling, and U.S. dollar.”

States are considering controls to prevent U.S. Dollars from moving into their currencies, bloating them up and making their exports too expensive. The IMF appears to be stepping into the vacuum that the collapse of the dollar is creating.

http://cryptogon.com/?p=1716

China's problem is that they have approximately $1.7 trillion worth of dollar reserves which would become nearly worthless when the dollar collapses. Thus, they need to get their reserves out of dollars before the dollar collapses. They can't sell their reserves outright without causing the dollar collapse, so they are looking for a transfer, negotiated with the IMF, of their dollar reserves into SDRs. At the G-20 summit this week, President Obama helped them gain power at the IMF so that they could proceed with this plan.

April 8 Financial Times, C. Fred Bergsten confirmed China's motives.

http://tradeandtaxes.blogspot.com/2009/04/c-fred-bergstein-advocates-that-we.html

[PhilipTaylor]

So China flooding their market with cheap credit will lower their currency value and support the dollar helping China's investment in the dollar.

[Carolab]

China is especially unhappy with today's US dollar dominance. Two-thirds of its $2 trillion of foreign exchange reserves is held in dollar securities. The Obama administration is running up record fiscal deficits, and this may eventually lead to a collapse of the dollar, and hence of the value of China's reserves.

So Zhou Xiaochung, China's central bank governor, is seeking to increase the role of the SDR as a reserve currency, as an alternative to today's dollar-dominated regime.

Strong support has come from an UN committee headed by Nobel laureate Joseph Stiglitz, and from other eminent economists, including Fred Bergsten of the Peterson Institute of International Economics and Martin Wolf of the Financial Times.

SDR issues represent potential liabilities for the underwriting economies - the US, EU, Britain and Japan - which are therefore wary about new issues. Western legislators have in the past criticized SDRs as inflationary.

http://www.guardian.co.uk/commentisfree/cifamerica/2009/apr/24/us-dollar-reserve-currency-sdr

STIGLITZ!

[GrkAm]

Under water? Without flood insurance?? I get the analogy, but the wrong photo.

Haven't we all seen mega-houses going up in our cities and towns in the last decade? They all need more heat, air conditioning, water, etc.

AND, more stuff to fill it. After all, it comes down to having more "stuff", doesn't it? It makes them look more important.

[BacktotheFront]

That was the idea of people selling the 50 year old metropolitan two bedroom duplexes at half a million and buying brand new mega-houses at a bargain in the outskirts of town. Only problem is those outskirts of town are now starting to be metropolitan cities too after a couple of boon cycles. Water being in short supply and electrical grids following.

[GrkAm]

Actually, someone who sold a 50 year old duplex shows some level of patience and business sense, or else they wouldn't have been able to keep it.

What I was referring to was the "gotta have it now, and it better be big" philosophy. Proven fact that the statement "instant gratification", isn't. You keep paying for it, and paying for it and paying for it.

But, yes. We have a glut of houses while natural resources are dwindling.