I was wondering if anybody had seen any historical data on how high the ratio of debt to value on a house can get before people start walking away from homes. I know every person will have a different tolerance for debt, but I’d guess that there is probably some consistency as to what that number is for most people psychologically/financially. And based on the current rate of price erosion one could make some predictions as to how long we can go before the meltdown accelerates due to foreclosures and bank failures.
Unfortunately, the data on housing is sparse, and even sparser from the past. Dataquick only started keeping data in 1988, and the NAR doesn’t even publish inventory data. Nobody is giving out data on loans, debt to income, etc., that I have ever seen. Some companies like First American Real Estate Solutions track this themselves, but they use it for their own purpose, and sell it for risk modeling. The media still relies on median as a way to gauge prices, and we know that it’s a fairly inaccurate.
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