We’re on the same page, however I don’t think that a very high % have used their home like an ATM to that extent.
I do expect general prices to continue declining, although not every neighborhood/area.
What do you mean by “lots” of BK’s ?
There is no doubt that many did refi and take cash out, but those that refi’d to 100% in 2005 are few.
If someone paid $40K years ago and refi’d to $300K in 2002 they still have equity and (hopefully) an affordable payment. If they only took out $50k-$100K, it’s no big deal.
With the current subprime borrower crisis, about 85%-90% of borrowers ARE paying their mortgages on time, even with an increase. In excess of 95% of Prime borrowers are paying.
The defaults will be a tiny % of the overall market, but will still have impact.
Realize that the crazy exotic loans did allow many people to buy (who would not have otherwise qualified) after 2001 and they now have equity and an affordable payment, and they are not defaulting.
In San Diego county, I think that it would be a HUGE stretch to say that 10% of homes are leveraged over 90% even at todays price.
I don’t know how many homes there are in the county.
I’d say that 90% of homeowners in SD county today could not afford to buy the home that they own today. There is something wrong with that.
The real problem is about 24-30 months of purchase window AND those who refi’d with large cash out.
I really do understand your point. (Some people who took money out improved their properties)
I just think that the number of real problems is low as an overall %.
No doubt there were a few that took out $500K and just blew it, but how many ??
Sure there will be some BK’s, but not a high %.
Some people expect a complete collapse, rolling back prices to 2001 levels. I don’t think it will happen.
Too many people have equity and only need to afford the difference of moving up or they just aren’t going anywhere.
Back to the OP question, there are people that have old houses owned free and clear, that they can sell for $700K+ and they can move to a brand new $1M tract house with a mortgage of less than the conforming $417K amount.
Although the market is weak and will correct, it’s not going to collapse.
Riverside county is a different scenario. A higher % there will be losing their homes due to affordability.
