Underwater Mortgages

Underwater Mortgages.

This is primarily an American term; in Canada, we call this negative equity.

When the value of a house isn't worth as much as the mortgage against it,

the situation is known as underwater mortgage. It usually happens when a

housing boom cause prices to rise rapidly. Houses are re-financed for the

maximum allowed at the inflated price. Bust usually follows boom, and prices

fall sharply, as happened in States recently, and to some degree in Canada.

(The preceding was added for Canadians as this is not a Canadian term).

Right now in the States, this affects 10.7 million properties.

(That's about 23% of all households).

It gets worse. There is right now, about 2.3 million additional

households with less than 5% equity, which are going to be needing re-financing.

In my opinion, that is going to glut the market again. I have had Canadian investors

ask me whether they should be buying right now and in all conscience, I have to

tell them to hold off for a bit, unless they are in it for the long haul.

I don't think it's going to depress prices further-it's going to stagnate them.

It will come back; it just isn't to happen over night.

The five hardest hit States are California (35%), Michigan (37%), Florida (45%),

Arizona (48%) and Nevada with a mind-boggling (65%).

Having said all that, I have referred several people

to Arizona, California and Nevada,

because I know they are in it for the long run. (10 years).

In most cases, their purchases down there wouldn't even buy the lot in Canada.

 

I don't recommend Florida, and Michigan isn't a player

as Canadians I deal with want sun-belt property.

So, if you some extra cash and are looking for good buys and you can wait it out,

call me. I have a referral network in place now

.