One in Five Homeowners Owe More Than Their Home’s Value
It’s estimated 20 percent of single-family homeowners, or 15.4 million, owe more on their mortgage than the current value of their homes. According to Moody’s this number is up from 13.6 million homeowners at the end of last year.
Another new Obama administration plan was just announced to try to help the foreclosure hurricane. This new plan focuses on encouraging short sales.
The earlier plans to deal with this crises from the Obama administration, have now been shown to have had only a marginal effect. It would seem that all the government intervention only creates lots of optimistic press and little actual relief.
The exception to my above opinion, is the Mortgage Forgiveness Debt Relief Act of 2007. This law states that the difference between the original mortgage and the amount for which a home sells at a short sale (i.e., the amount of debt forgiven by the bank) is no longer considered taxable income by the IRS.
Perhaps, just perhaps, the government should not meddle in the foreclosure process. After all, the reality and cure to this housing problem is the fact that home prices need to fall to a level at which all the excess inventory will be absorbed.
In my opinion, though well intentioned, the majority of goverment mortgage assistance/foreclosure moritoriums are only extending the natural cure time and provide little actual long term solutions. San Diego real estate
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In my working class neighborhood it was hard to miss that something went wrong when all the houses tripled in value. No one here got a raise but young families somehow bought homes that we’re half-million dollar fixer-uppers. The only reason the fed, banks, and the government missed it was that they were too busy counting their money to care where it was coming from.
Hoodia Gordonii
Home prices do not double in price on average every ten years. There is no evidence to support such a statement. S&P case shriller home index which goes back to 1890 found that SFR prices went up at the rate of inflation over time. If they do double in any short period it’s called a asset bubble and values return to medium as the bubble implodes. OFHEO also shows long term prices run with inflation and return to normal price levels rather than continuing to rise. In order for RE to double every 10 years average income would also need to rise with it, which if you haven’t noticed doesn’t happen and when it does as during the 70’s yield on bonds jump into the teen’s and the FED pushes up interest rates causing home prices to decline.
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