Deutsche bank just put out a very depressing report.
Over 25% of mortgages are under water (the house is worth less than the outstanding amount of the loan).
That’s an incredible statistic. One out of every four loans. They expect this to rise to 48% in the 1st quarter of 2011. (To be fair, keep in mind that anyone who has fully paid off their house is not part of that statistic because they don’t have a mortgage.
I believe the report. I believe it will take another 2 years before economy sees material improvement. This is worse recession since the Great Depression. Don’t believe the real estate agents and investment (sales) professionals who tell you recovery is around the corner…
I wonder if the DB report is only looking at first mortgages or if they are somehow able to access data regarding the net amount owed on properties, such as lines of credit that use the property as collateral. For example, we have a primary mortgage on our house in Kentucky (mortgage with bank A) and a HELOC (bank B), which we could choose to access up to an additional ~20% of the home value if we wanted to do so. It wouldn’t surprise me if the statistic was higher if some of these vapor equity lines were included. We financed the home up here on a 15 yr note just to instill a little more disciple and pay down the note faster….hope that will keep us in the black even in a declining market….prices seem steady here.
I know that feeling too well. I’m not THAT far under (maybe 10-15k) but still…
Unlike people that got caught up in the whole sub-prime thing, this really is just the buyer’s fault.
Did I assume that my house would go up in value? Yeah.
Was I stupid to assume houses would always go up in value? Yeah (though if BRAC ever realy comes through, I may recover nicely).
Some of this is mitigated if you didn’t look at your purchase as an investment and, instead, looked at it as a place to live.
Of course, owing more than its worth is still a bad thing, but it isn’t AS bad.
(of course, mine has turned into an investment since I now rent it out, but I really did buy for the intrinsic value (a place to keep my stuff) of the house, not its investment value)