[quote=UCGal]The headline is slightly misleading… It’s corrected in the 2nd paragraph.
It should read 1/5 of homeowners who have mortgages owe more than the property is worth.
There’s a significant number of folks who’ve been in their house for years and have no mortgage. I’ve seen estimates is as many as 1/3 of homes do not have a mortgage.[/quote]
1/3rd have no mortgage, 1/3 have a mortgage they got during the bubble.
what it is saying is 2/3rd of Bubble era home buyers are underwater.
It’s a cohort,
think of the Housing ladder,
say there are 4 types of housing unit in 2000.
Condos, Town Houses, Single Family Houses and mcMansions
Arbitrarily in 2000.
Condos are 100K
TH’s are 200K
SFH’s are 300K
mcmansions are 400K.
by 2005 they have doubled. 15% appreciation by 5 years.
Condos are 200K
THs are 400K
SFH’s are 600K
McMansions are 800K
assume each buyer put 10% down
condo buyer has 10K + 100K bubble equity.
TH has 20K + 200K Bubble Equity.
SFH has 30K + 300K Bubble Equity
mcMansion Owner has 40K + 400K bubble equity.
now look at moveups.
the Condo-> TH buyer puts 110 down on 400K, that’s 25% equity.
The SFH Buyer puts 220K into a 600K house or 33% equity.
The McMansion Buyer puts 330K into an 800K place.
or 40% equity.
Now prices fall 40%.
the bottom guys are all underwater badly, the top
person is barely swimming, and making payments on
a much bigger note…..
