Thursday, Aug 03, 2006

Defaults explode in California

Firstrung: Mortgage defaults rise 67% in California in the last quarter

Mortgage defaults in California rose more than 67 percent during the second quarter, compared with the same period last year, the result of slowing annual home price gains, a real estate research firm said Wednesday.

Posted by converted lurker @ 02:24 AM (438 views)
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1. inbreda said...

This is a fantastic article because it says things like

"Prentice said the rise in defaults was mainly caused by slowing home price appreciation, which makes it harder for homeowners who fall behind on their mortgage payments to sell their homes."

Basically, if house prices are rising, people don't want to sell an appreciating asset, but if they HAVE to then they are able to because it will sell quicker (than a depreciating asset) and the funds will cover all the debts.

The increase in defaults are caused because people can no longer afford the mortgage, can no longer borrow against the (maxed out) value of the property, and can't sell the property quickly.

It also hints at the attitude that makes people rush after appreciating assets, but drop depreciating assets like hot rocks.

Thursday, August 3, 2006 11:28AM Report Comment
 

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