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cashinmattress

42 Percent Of California Mortgages With Negative Equity

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he Treacherous Path for Housing - 42 Percent of California Mortgages with Negative Equity: $1 Trillion in Mortgages Submerged Underwater in California. $3 Trillion in U.S. Mortgages Underwater and Risking Foreclosure.

$1 trillion in California mortgages are underwater and swimming in the Pacific Ocean. $3 trillion in U.S. mortgages are in a negative equity position. What this means is borrowers owe more than their home is worth. A few research papers have shown that the number one factor in determining potential foreclosure is being upside down on a mortgage (job loss is up there as well). You can rest assured that all those Alt-A and option ARM mortgages in California are underwater to the point of touching sea bottom. How bad can it get? One area in Southern California, the Inland Empire has an estimate total housing property value of $222 billion. Only problem is there are $238 billion in mortgages attached to these properties. Two enormous counties with negative equity.

Take for example the larger Los Angeles and Orange County areas. We have some $1.077 trillion in housing property yet a total of $311 billion of mortgages are underwater. This does not mean they are currently in foreclosure but the likelihood is extremely high. Given that the Alt-A and Option ARM loans are more prominent in the so-called “prime†markets, a large number of these loans will implode on first recast. Many are defaulting prior but once the recast hits, it will be game over. Banks know this and that is why they are hiding foreclosed properties from the public view.

I’ll try to make this a comprehensive review of the nationwide housing market and will also focus on issues specific to California since it makes up one-third of the face value of mortgages underwater. First, the main cause of this problem is the real estate crash:

The Federal Flow of Funds report shows that over $5 trillion in real estate value has been wiped off the map since the peak hit. That is a quick way to put a tremendous number of mortgages underwater. The incentive to pay on a home that is worth less than you paid for is a psychological jolt. We are conditioned to believe that a home is the greatest investment ever so when we are then told that a home is underwater, it strikes at the core of an American mantra. What should have been expressed is housing is a great investment if purchased at the right price and not inflated casino values brought about crony Wall Street and their epic bubble machine. It is hard to predict the ramifications down the road of this wealth annihilation. We’ve never seen so much household wealth disappear. The stock market crash has also hurt but there is something intrinsic about a home that is going to shatter consumer confidence for a very long time. Let us look at the overall household balance sheet since the recession started:

.... (lots more, with great graphs)

us-real-estate-values.png

The 'golden' state with huge troubles. Looks as if a few generations of wealth have vanished into the ether. Take note, because our silly housing market was equally as inflated with crazy credit.

And this is only 2 years in! Will we see housing in America return to zero value, with only the outstanding tax and legislative warrants weighted against them, which happened in the last depression?

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The situation in California is dire.

We are 18 months behind them and are only warming up. Their bubble started to burst in 2005/2006. We started to pop then too but had an ill advised rate cut which caused even more froth before ou final pop in 2007.

There are many parallels between California and the UK :

- Inward migration ("poor" EU here - Mexico and Central America there)

- Large military and aviation businesses

- Large higher eduation business

- A high proportion of the land unavailable for use (planning here, water there)

- A huge regulatory and tax burden which makes the markets unappealing for new business (international competition here : national and international competition there)

- A sharpening divide between the haves and the have nots

- A massive quality of life difference depending on when you bought your house

- Hugely overpriced houses relative to neighbours (the rest of the EU here, other States there)

- Hugely overpriced houses relative to incomes

- High levels of personal indebtedness

- Living off a great past which isn't reflective of the current reality

- Influential media / spin etc

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According to the lib/lab/con leaders California is a shining example of a green economy, through smart government regulations and taxes that encouraged that industry.

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According to the lib/lab/con leaders California is a shining example of a green economy, through smart government regulations and taxes that encouraged that industry.

California and the UK both suffer from a similar affliction. They do not understand that you cannot spend money that you don't have ad infinitum.

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California and the UK both suffer from a similar affliction. They do not understand that you cannot spend money that you don't have ad infinitum.

Soon enough I reckon we will see the UK adopt a '3 strike' criminal system over here. Even three petty crimes, like stealing fags or food from the supermarket will land you in prison there for up to 25 years.

There is big money in the penal system, and we here in Britain are just bursting at the seams with petty criminals.

Heck, most of these BTL and house flipping folk are by definition, petty criminals, because of the extreme levels of deceit and fraud perpetrated upon the lenders and state during the mortgage application process.

Meh.

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http://business.timesonline.co.uk/tol/busi...icle6797123.ece

"B&B, which was the UK’s largest lender to landlords before it was broken up and its mortgage book nationalised last September, said yesterday that 40 per cent of its mortgage book was in negative equity, up from 30 per cent at the end of 2008."

40%-ish has a familiar ring. CA and the UK have much in common:

http://www.housepricecrash.co.uk/forum/ind...ost&id=4113

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The situation in California is dire.

We are 18 months behind them and are only warming up. Their bubble started to burst in 2005/2006. We started to pop then too but had an ill advised rate cut which caused even more froth before ou final pop in 2007.

There are many parallels between California and the UK :

- Hugely overpriced houses relative to incomes

- High levels of personal indebtedness

but a very different attitude to property thxs to non-recourse mortgages?

Did I not read about people dumping their existing homes & now buying bigger & better for less & thus reducing their payments?

No I don't know how they get another home loan either, perhaps someone can explain?

EDIT:- missed 'bigger & better'. - They sound like Tufty club members

Edited by Laura

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According to the lib/lab/con leaders California is a shining example of a green economy, through smart government regulations and taxes that encouraged that industry.

Green?

It puked up all of its manufacturing, if that's what they mean.

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