I was listening to the radio (NPR) today while on the way to walk through a house for a final inspection prior to closing, note I was going to a house that some one was just getting ready to complete the sale.
Someone on the radio mentioned that there are currently 9,000,000 homeowners in the USA that are upside down with there home, i.e. they owe more than they could sell the house for if they should need to sell. This is roughly 10% of the homes owned in the USA. The federal reserve has been tracking this number since after just after world war II. The commentator then asked would this have a negative impact on the number of homes going into foreclosure,well of course as people discovery they have negative equity they will walk away from their homes. (Excuse me, I am not really an avid Ronald Reagan fan but I am going to have a Reagan moment.) My take this comment "Well here you go again."
To make such a blanket statement that when people are upside down on their mortgage they tend to walk away from the house raises several questions for me.
The commentator also made it clear that this was not a good time to buy a home.
1) Where do they go?
2) Do they also sell the stock they have because it is worth less than they paid for it.
3) Why would I leave my home just because I owe more than I could sell it for? After all I have to live somewhere and granted I do like backpacking and have a nice tent, but I also like a hot shower now and again.
4) Why is this a bad time to buy a home?
It is time for the media to be specific. Speaking in blanket terms is not responsible reporting. Granted there are parts of the country that are in trouble, there are parts of Indianapolis that are not doing so well. Granted some people will simply walk away from their homes, usually those that have adjustable rate mortages or purchased more home that they should have to begin with and granted if you put no money down you may, may feel less compelled to try and stay in your home, however after 16 years in real estate sales no one has called me to say I am just walking away, most want to work things out. If someone is being transferred for a job, it may be a problem depending upon where they live, but quit getting on the airwaves telling me that my neighhood is in terrible shape, cause it isn't. I have told homebuyers and owners for years that if people checked their home value on a daily basis, no one would buy a house, but you gotta live somewhere so why make your landlord rich.
I don't know the solution(s) to the real estate markets current problems but let's start with a little truth on the part of the media and the experts. Yes things are challenging however the market is not blanketly bad and it is still a good time for investors and first time buyers.For goodness sake people think this through, I met someone today that refinanced at 4.5% 15year fixed mortgage, and the media will tell us the bad news monday that the interest rate jumped to 4.51% and make it sound like the rates are higher than they have ever been.
P.S. what do you bet the same newscasters that preach the sky is falling own several homes, probably bought a bargain in FL.
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