Wednesday, Feb 13, 2008
Negative Equity
Bloomberg: Americans Selling Homes See Prices Go Below Mortgage
America learns all about negative equity, although they don't seem to use that phrase yet.
"Thirty-nine percent of people who purchased a home two years ago already owe more than they can sell it for"
``It comes to the point where you have to decide: Do I want to take a big loss now or an even bigger loss later?''
Posted by ontheotherhand @ 05:15 PM (498 views) Add Comment
6 Comments
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1. bystander said...
``It comes to the point where you have to decide: Do I want to take a big loss now or an even bigger loss later?'' he said.
How long until this is the response in the UK????????????
2. Plato said...
This Subcrime market is not looking good. Did I make a spelling mistake somewhere? No,can't see one. Anyway on a more serious note this is badly affecting my Pension and other investments (not just me,I'm sure) as this whole blinking lot has been mixed together, scrambled and reformed into a hideous mess. I'm out of Japan now after takng a steady loss for nearly 2 years hoping things would hold out there - It's all looking particularly fragile. I bought a tent as an emergency investment and that too beleive it or not is now in Negative Equity.
Still it is a property after all. I'm trying to think of any ordinary home that doesn't eventually deteriorate in value. Looks like it's all the associated services that go with a home that really profit. Is there a lesson to be learnt here?
3. handle_it said...
I think most people will try to just keep paying the mortgage. The time when negative equity comes into play is when the banks snatch-back the property and sell as fast as they can via auction. A friend of mine bought a flat for about 50kish. When the market crashed in the early 90's his one bed flat sold at auction for 19k. He went bankrupt.
4. Jolo said...
I think when it gets to that stage, People lose the choice of weather to sell now or later. They simply have to sell because they can't afford to live in the property anymore regardless of making a profit or losing money. And if interest rates remain above 5% this year we could see the same thing in the U.K. meaning a lot of property on the market with no buyers, Well certainly not at the prices they want for them.
5. lvmreader said...
@handle_it,
What did you just see Egg do? that's right, penalise good customers. What makes you think a bank won't start selling homes where the mortgage payer is bang-up-to-date, simply because a "repossessed property" due to default fetches less at auction. Wait and see. Stranger things have and yet will happen.
6. inbreda said...
"2. handle_it said...
I think most people will try to just keep paying the mortgage."
For people who have a mortgage on their HOME, I agree with you. But all those BTLers who have gleefully been going to dinner parties and boasting about how much money they've made in property in the last 3 minutes...... Well, after being told how much they're losing every three minutes, I don't think they will try paying the mortgage for long. Particularly if the value is heading toward their purchase price. Take profits or make a loss. That will be their choice.