Les Jones: Zillow: Many homeowners upside-down on their mortgages

August 13, 2008

Mortgage Crisis > Zillow: Many homeowners upside-down on their mortgages

Bloomberg - One Third of New Owners Owe More Than House Is Worth:

The highest percentages of homeowners with negative equity were located in California. In four of the state's metropolitan areas -- Stockton, Modesto, Merced and Vallejo-Fairfield -- the number of homeowners whose mortgage debts exceeded the values of their properties topped 90 percent, Zillow said. In five more California areas -- the Inland Empire (Riverside-San Bernardino), Bakersfield, Yuba City, El Centro and Madera -- the percentages were more than 80 percent.

Dang. That's a bad situation to be in. Even if you owe exactly what your house is worth you're really upside down once you consider the standard 6% realtor's fee and closing costs. That's assuming you can even sell in a soft market. If you're actually upside-down on your mortgage you're pretty much stuck in the house waiting for the market to rebound. If you lose your job and have to move to another location you'll lose your house and all the equity unless you have a big cash reserve to settle the mortgage.

I won't go into Housing Panic-style histrionics, but this portends a tough road in some areas and particularly in California.

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Comments

Housing is starting to sound a lot like other loans, say Car or RV loans. But in those cases, every one knows going in that the minute they sign the papers, they owe more than the resale value. If you live in a house and break even you should be happy, People who rent never get a ROI!

A house should be seen as a commodity, not an investment. But that would require that people buy sensible houses so I guess it would not work. I am satisfied with my 35 year old house, has been paid for these last 10 years, and I really wish it would not appreciate in value! Every time the local elected vultures assess it, my taxes go up! Been in it for 25 years, I guess I am an oddity in today's culture.

Posted by: Nosmo at August 16, 2008

Since California (and a few other states) require all mortgages to be no recourse (i.e. if the debtor defaults, all they can do is foreclose on the house, they can't sue them in court for additional money to cover the underwater part of the mortgage), thinks are likely to get especially bad there.

Posted by: Stormy Dragon at August 20, 2008