As home prices fall, more borrowers walk away
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As home prices fall, more borrowers walk away
2 hours ago
By John W. Schoen, Senior Producer
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"It's a looming problem that's in the shadows," said Jason Kopcak, a mortgage trader at Cantor Fitzgerald who advises lenders on how to value the loans on their books. "It's very worrisome to mortgage lenders."
Researchers point to a number of forces that are driving borrowers to walk away from their mortgages. At the top of the list is the estimated 12 million homes that are underwater, meaning the owners owe more than they are worth.
Until recently, borrowers like Martin and many industry analysts held out hope that a housing recovery would reverse the rising tide of "negative equity." But after stabilizing this summer, home prices began falling again, dropping 7.5 percent in the third quarter alone and leaving more homeowners underwater.
Even if prices stabilize this year, millions of underwater borrowers face a long wait before they can sell their homes without having to write a big check to their lender to cover the shortfall. Economists at Goldman Sachs recently forecast that after bottoming in 2013 house prices won't recover their 2006 peak until 2023. (No, that's not a typo.)
Many homeowners simply can't wait that long.
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Arctic Dave
(13,812 posts)By staying they are taking a longer term cut then they would by walking away and having their "credit score" go down.
Huey P. Long
(1,932 posts)at a bargain/market price, THEN walk away from my anchor. This can be done easily.
Your credit will take a hit, but after you've secured a better living/survival situation.
jwirr
(39,215 posts)not seem to have come down.
Huey P. Long
(1,932 posts)
liberalmike27
(2,479 posts)It seems the law of supply and demand has become the law of trying to prop up the prices in supply. Housing prices have gone down, but people keep charging the same rent, the same prices, they keep trying to prop up a time that is gone, due to down-sizing, and globalization. Lower wages translate to lower prices, or you don't sell things.
I'd say if you can afford it, don't walk away, to give obvious advice. But banks are just going to have to adjust, and the reason prices are dropping is that they were too high in the first place.
Same thing with training on jobs--in my youth, if you got a job that required a little training, at a shipyard, or whatever, you went through at training program in your first month or two. Now companies don't seem to realize they need to do that. Even people educated in the jobs' field will need training. It would seem some basic tenets have been thrown out at jobs, and in life.
So walk away briskly, and don't look back--the bank got a ton of money from the tax-payers, and they made the bad loans, and overcharged in the first place, and are responsible for buying politicians to make all of this possible, without proper regulation. It's their fault.
pocoloco
(3,180 posts)"Would alternate housing be available?", might be the
a consideration.
Arctic Dave
(13,812 posts)Huey P. Long
(1,932 posts)receive from your old house (the underwater one) as income on your mortgage application. After you get your new cheaper house all finalized, either decide to rent your old house for real, or let that sucker go to the bank. Easy as pie.
Or. if you want to wait it out for about 7 years, yes, rent.
willing dwarf
(1,089 posts)The mortgage companies are checking everything extensively. If you claim income from a rental, you need to show cancelled checks and a rental agreement (lease) on the property. A month to month lease isn't good enough either, you need to have a year's lease at least.
Huey P. Long
(1,932 posts)I will leave the creative minded to think this through.
Kurmudgeon
(1,751 posts)Huey P. Long
(1,932 posts)I am also not the one letting them get away with it.
cyberpj
(10,794 posts)equity if you walk away from your old one and buy a new one.
Anyone know?
jwirr
(39,215 posts)i_sometimes
(201 posts)We bought our place in '08 for 92k, its worth about 73k now. We pay 568.00 a month. I can't rent a place like mine for that. Plus, its mine. So why walk away? Because on paper its worth almost 20k less?
Doesn't make sense to me, what am I missing?
Huey P. Long
(1,932 posts)i_sometimes
(201 posts)We bought this house to live in, its not an investment, its our always going to live here home.
We can add on if we need to. We could by the lot next door for more yard.
It seems like these homeowners are worried more about when they sell even if most of them are not going to.
We wouldn't sell, if we wanted to move, we would rent it out for far more than what we are paying.
In the end, rent=mortgage payment, make sense?
dixiegrrrrl
(60,157 posts)because our house payments are lower than comparable rents ( which are rising)
and we plan on staying IN the house for many years.
So our "loss" in price is not realized unless/until we try to sell
plus
I always think of my low low low mortgage payment as rent to the bank anyhow.
In fact, with lower housing value, your property taxes should be decreasing?
another way to think of it.
I bought a house previously, rented it out when I moved away for a better job, after a few years sold it at a loss,
but saved a ton on my income taxes because I could count the loss against my then much higher income.
To most people,I "lost" money on the house.
Actually, on paper, I saved more in taxes, ( zero down on the house when I bought it)
plus the rent made the house payments, so I was ahead.
liberalmike27
(2,479 posts)A house is just a place to live--most of the people walking away have lost jobs, and are unable to get another, or at least another that enables them to keep paying huge payments, that should be less according to what the house is actually worth.
So walk if you can't, but if you want to stay, if you are happy living in the neighborhood, it's just a place to stay in the end, and like someone else pointed out, rents are generally much higher than payments anyway.
I was looking at rents in local apartments the other day, and I did notice that they seem to be dropping. So it seems banks and apartments are adjusting down the prices to match dropping wages. It seems a wise choice to do, rather than let neighborhoods go empty, taking on a bunch of empty houses that'll be plundered for copper and such.
KansDem
(28,498 posts)I've been wondering for years if Boomers are going to have that "nest egg" for retirement. Many of us bought homes on 30-year mortgages assuming we will sell them when we retire so we'd have that investment go along with SS and Medicare. Now with the housing market imploding, we will be lucky to "break even."
And with the attack on SS and Medicare, it looks like more and more of us will have to keep working until we die.
jwirr
(39,215 posts)bought homes on the 30 year mortgage with the idea of living in them when we were older. So success did not depend on the resale value but on getting it paid off.
willing dwarf
(1,089 posts)Here's how I see it. In the 70's & 80's most households rose to two incomes w. the majority of women entering the workforce. That led to the increase in housing prices, and the increase in spending and easy credit. Housing prices continued to climb and as a result, real estate became and investment option. Home equity loans were pushed and so houses became individual ATM's. -- The increase in income with the two incomes per household was a shift that led to the bubble.
jwirr
(39,215 posts)the old way of thinking. They are lucky as they just about have the home paid off. They did end up helping one of their kids who moved in with them with the idea of buying the house when dad and mom bought another one for themselves. They are now living with two families in a 4 bedroom house. Crowded.
willing dwarf
(1,089 posts)I know that the "nuclear family" makes a lot less sense to my family as we look ahead. We have, between us, 10 adults in two generations and 7 houses which can hold collectively about 40 people quite comfortably, so right there we are looking at about 75% more housing than we need if we lived together. If ,even 10% of the people in this country scale back in this way, we would have a huge contraction of the housing market. Of course, there are the youngsters coming on, coupling up, and eventually the 6 of them we have in our extended family will probably be able to fill those extra houses.
Still, it makes you wonder if we won't all be moving in together soon, just to pay the heating bills! Let's all get along now!
HCE SuiGeneris
(14,997 posts)With the trillions of dollars in REOs and potential defaults still lurking, how the hell do you derive the estimated year of recovery with any accuracy?
closeupready
(29,503 posts)K&R
LynneSin
(95,337 posts)Tom Hanks plays this kinda loser guy who gets downsized from his job of like 20 years ('claiming he didn't have a college degree').
Of course this is California so to make matters worse he owns a home he is upside down in.
He did go back to college, took an economics class and realized that he should just walk away from the mortgage so he did.
Tom Hanks' wife Rita Wilson did a great cameo as the annoying banker.
Huey P. Long
(1,932 posts)FreakinDJ
(17,644 posts)Last I read we have 500,000 homes torn down anually through attrition and had a anual growth of 2.5 Million housing units just to keep up with growth. At some point we are going to run out of our ability to move in together
stopbush
(24,801 posts)A home is a long-term investment that made a lot of sense when one worked for a single company for 30 or more years, and when people retired at about the same time they paid off their mortgage.
Today's average worker can expect to have at least 12 different jobs over the course of their working career, and the chances of those 12 jobs being located within driving distance of a home one is purchasing are slim. Americans have become mobile by necessity. We're chasing jobs, no more so than in the industries that used to be the prime engine of creating those jobs that offered long-term employment.
Buy a home today and you're not likely to stay in it long enough to even build up any significant equity. Not because you wouldn't like to stay in it, but because you can't.
Renting seems a better option. You'll generally pay less per month than you would purchasing a home, you don't have a huge down payment sitting at a bank (so you have more liquidity) and most of all, you're not besieged with the normal expenses that come with owning a house, like replacing a roof or a furnace/AC unit or dealing with leaky plumbing and the host of other things that blow up unexpectedly in your financial face when you own a property. And, you can basically pick up and move whenever needs must, rather than being saddled with a property that you need to unload before you can make a move to that new job you somehow secured.
ms.smiler
(551 posts)Unfortunately, most homeowners simply don’t understand their securitized mortgage, which of course works in the banksters favor.
I prefer to see homeowners retain their property, rather than banksters receive compensation yet again upon the same loan.
If anyone wishes to know more, my own story is located here: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=2412603&mesg_id=2412603
I have plenty of equity in my home, it's just that I came to understand this scam. The securities fraud that took place on Wall Street is directly connected to our mortgage loans here on Main Street. Once I realized I would never receive a valid Deed and clear Title, I decided to fight the banksters.
If you lack an understanding of securitized mortgages, please inform yourself. All that has happened in our economy, will make much more sense to you.
Huey P. Long
(1,932 posts)
Evasporque
(2,133 posts)So here we are...another shining example of how Republicans sucked up to big finance money and gave them the moon and stars...and in the end some couple assumed too much risk while the banks and Republicans walked off holding the cash leaving the home owner's the empty bag for of empty promises.
Americans believed that Real Estate was the best investment...the propaganda machine worked overtime to get everybody buying overvalued homes that people ultimately could not afford...inflated real estate prices and bank freely loaning to anybody with a pulse...Bush and Co. were the biggest cheer leaders in 2002 to enable homeownership....despite cloudy economic outlooks...compounded by War...no it was a beautiful plan...take the money from people who invested in real estate...bilk them and trick them into taking more they could afford, knowing the bubble was going to pop...then take their retirement and healthcare and ultimately take everything.
Who is to blame? Lots of people are....but in general it is the overall immoral financial industry supported by corrupt CONSERVATIVE politicians.
