Sunday, Feb 24, 2008
Flippers hand back the keys as crisis spreads
Observer: US house prices plunge into negative equity
More American homeowners are mired in negative equity than at any time since the Great Depression of the Thirties, a signal that the housing crisis has spread to the wealthier middle classes. Over 10% of homeowers owe more on their mortgage than their homes are worth.
Bob Corwin bought a condo for $315,000 and spent $365,000 doing it up. It sold for just $290,000.
'Foreclosure is a good option for flippers,' Wyss says. 'If your house is in negative equity and you can't sell it, why should you go on making mortgage payments? It makes little sense. You can just walk away and hand the keys over to the bank.'
The worry now is that the US market could be flooded with over 5 million foreclosed houses in the next year, deepening the crisis further.
5 Comments
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1. paul said...
In the UK you can't simply hand in the keys - no we have a much better way called an IVA.
2. Orwell said...
Is Rosie Millard still flipping?
Bless her and may she make the lead role of Cathy Come Home (and not as the Landlady)
3. Orwell said...
Barb Corwin, 37, knows all about negative equity. She has watched hundreds of thousands of dollars worth of value drain out of three properties she bought just a few years ago. 'I have put 10 years of my life into buying and renovating properties, and I believed that I would sell them, pay off the mortgages and make a profit. But that didn't happen. I feel like the past 10 years have been wasted.
Mmmmm 3 properties....
4. Slysmiles said...
IVA's are going to get harder and harder to get as the numbers go up. Don't forget the lenders have to agree to write off a portion of the debt. If they don't agree, bankruptcy, including repossession, will be the only way to proceed.
http://www.guardian.co.uk/money/2007/jan/30/creditanddebt.business
5. A Saver said...
Scary to note how much value these properties lost, compared to (1) their value FIVE YEARS AGO (290,000 vs 680,000) and (2) official figures for the property downturn. This is MASSIVE! Does not bode well for CDOs or US bank solvency.