Homeowner equity is lowest since 1945

[jpinpb]

Thanks for posting that article.

[evolusd]

Long time Pigg…first time poster!

I think the more telling stat in the article was:

“Moody’s Economy.com estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be “upside down” if prices fall 20 percent from their peak.”

San Diego is down 19+% from it’s Nov 2005 peak. I’m guessing we’ll see more ‘mortgage walkers’ as prices continue to fall and people have less incentive to pay heafty payments on a home that isn’t worth the loan amount. I have friends who overpaid in Murietta in mid-2007 with 95% financing (despite my advice not to) that are now about $150-200k underwater. What incentive do they have to keep paying the mortgage? A foreclosure on your credit is not going to be quite as taboo when all this works itself out.

[evolusd]

Long time Pigg…first time poster!

I think the more telling stat in the article was:

“Moody’s Economy.com estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be “upside down” if prices fall 20 percent from their peak.”

San Diego is down 19+% from it’s Nov 2005 peak. I’m guessing we’ll see more ‘mortgage walkers’ as prices continue to fall and people have less incentive to pay heafty payments on a home that isn’t worth the loan amount. I have friends who overpaid in Murietta in mid-2007 with 95% financing (despite my advice not to) that are now about $150-200k underwater. What incentive do they have to keep paying the mortgage? A foreclosure on your credit is not going to be quite as taboo when all this works itself out.

[evolusd]

Long time Pigg…first time poster!

I think the more telling stat in the article was:

“Moody’s Economy.com estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be “upside down” if prices fall 20 percent from their peak.”

San Diego is down 19+% from it’s Nov 2005 peak. I’m guessing we’ll see more ‘mortgage walkers’ as prices continue to fall and people have less incentive to pay heafty payments on a home that isn’t worth the loan amount. I have friends who overpaid in Murietta in mid-2007 with 95% financing (despite my advice not to) that are now about $150-200k underwater. What incentive do they have to keep paying the mortgage? A foreclosure on your credit is not going to be quite as taboo when all this works itself out.

[evolusd]

Long time Pigg…first time poster!

I think the more telling stat in the article was:

“Moody’s Economy.com estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be “upside down” if prices fall 20 percent from their peak.”

San Diego is down 19+% from it’s Nov 2005 peak. I’m guessing we’ll see more ‘mortgage walkers’ as prices continue to fall and people have less incentive to pay heafty payments on a home that isn’t worth the loan amount. I have friends who overpaid in Murietta in mid-2007 with 95% financing (despite my advice not to) that are now about $150-200k underwater. What incentive do they have to keep paying the mortgage? A foreclosure on your credit is not going to be quite as taboo when all this works itself out.

[evolusd]

Long time Pigg…first time poster!

I think the more telling stat in the article was:

“Moody’s Economy.com estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be “upside down” if prices fall 20 percent from their peak.”

San Diego is down 19+% from it’s Nov 2005 peak. I’m guessing we’ll see more ‘mortgage walkers’ as prices continue to fall and people have less incentive to pay heafty payments on a home that isn’t worth the loan amount. I have friends who overpaid in Murietta in mid-2007 with 95% financing (despite my advice not to) that are now about $150-200k underwater. What incentive do they have to keep paying the mortgage? A foreclosure on your credit is not going to be quite as taboo when all this works itself out.

[Mean Reversion]

I didn’t know this was obvious.

It isn’t just that people are underwater. That is less than 10%. It is that the average homeowner now has less than 50% equity. I hadn’t heard this statistic before.

Perhaps if things are so obvious to you, you can tell us how this is all going to play out?

In any case, I think this helps mark a big psychological shift in homeownership thinking. The house-as-an-ATM mindset will gradually be a thing of the past as it never should have existed in the first place. That along with everyone thinking it is prudent to buy a home with 0% down.

[Mean Reversion]

I didn’t know this was obvious.

It isn’t just that people are underwater. That is less than 10%. It is that the average homeowner now has less than 50% equity. I hadn’t heard this statistic before.

Perhaps if things are so obvious to you, you can tell us how this is all going to play out?

In any case, I think this helps mark a big psychological shift in homeownership thinking. The house-as-an-ATM mindset will gradually be a thing of the past as it never should have existed in the first place. That along with everyone thinking it is prudent to buy a home with 0% down.

[Mean Reversion]

I didn’t know this was obvious.

It isn’t just that people are underwater. That is less than 10%. It is that the average homeowner now has less than 50% equity. I hadn’t heard this statistic before.

Perhaps if things are so obvious to you, you can tell us how this is all going to play out?

In any case, I think this helps mark a big psychological shift in homeownership thinking. The house-as-an-ATM mindset will gradually be a thing of the past as it never should have existed in the first place. That along with everyone thinking it is prudent to buy a home with 0% down.

[Mean Reversion]

I didn’t know this was obvious.

It isn’t just that people are underwater. That is less than 10%. It is that the average homeowner now has less than 50% equity. I hadn’t heard this statistic before.

Perhaps if things are so obvious to you, you can tell us how this is all going to play out?

In any case, I think this helps mark a big psychological shift in homeownership thinking. The house-as-an-ATM mindset will gradually be a thing of the past as it never should have existed in the first place. That along with everyone thinking it is prudent to buy a home with 0% down.

[Mean Reversion]

I didn’t know this was obvious.

It isn’t just that people are underwater. That is less than 10%. It is that the average homeowner now has less than 50% equity. I hadn’t heard this statistic before.

Perhaps if things are so obvious to you, you can tell us how this is all going to play out?

In any case, I think this helps mark a big psychological shift in homeownership thinking. The house-as-an-ATM mindset will gradually be a thing of the past as it never should have existed in the first place. That along with everyone thinking it is prudent to buy a home with 0% down.

[DWCAP]

I think some of the point is the sheer number of people who are in trouble. Just like the median price can be horrible at telling people what is going on in the market, the average equity measure can be skewed and not very useful. However it can be interesting in predicting the number of people that will be able to sell if they need to and move, the number of people at risk of foreclosure, and the number of people who may just walk away.

Plus a large precentage of baby boomers are counting on their home equity to retire. How many times have you seen one of those CNN profiles that has someone as a millionare because they bought a house in 96 in the OC but have 50k in savings and are contributing 2% of pay to the 401k and want to retire by 55? They are millionares right! Millionares dont work to 65! If things go back to 2001 or earlier pricing, what are they gonna do?
This is the otherside of the RE motto “the house is the homes largest asset”, if it isnt what they want it to be, or rather NEED it to be, then they are all just like the people who lost their shirts in the tech bust.

But you are right FLU, it isnt the most insightful number.

[DWCAP]

I think some of the point is the sheer number of people who are in trouble. Just like the median price can be horrible at telling people what is going on in the market, the average equity measure can be skewed and not very useful. However it can be interesting in predicting the number of people that will be able to sell if they need to and move, the number of people at risk of foreclosure, and the number of people who may just walk away.

Plus a large precentage of baby boomers are counting on their home equity to retire. How many times have you seen one of those CNN profiles that has someone as a millionare because they bought a house in 96 in the OC but have 50k in savings and are contributing 2% of pay to the 401k and want to retire by 55? They are millionares right! Millionares dont work to 65! If things go back to 2001 or earlier pricing, what are they gonna do?
This is the otherside of the RE motto “the house is the homes largest asset”, if it isnt what they want it to be, or rather NEED it to be, then they are all just like the people who lost their shirts in the tech bust.

But you are right FLU, it isnt the most insightful number.

[DWCAP]

I think some of the point is the sheer number of people who are in trouble. Just like the median price can be horrible at telling people what is going on in the market, the average equity measure can be skewed and not very useful. However it can be interesting in predicting the number of people that will be able to sell if they need to and move, the number of people at risk of foreclosure, and the number of people who may just walk away.

Plus a large precentage of baby boomers are counting on their home equity to retire. How many times have you seen one of those CNN profiles that has someone as a millionare because they bought a house in 96 in the OC but have 50k in savings and are contributing 2% of pay to the 401k and want to retire by 55? They are millionares right! Millionares dont work to 65! If things go back to 2001 or earlier pricing, what are they gonna do?
This is the otherside of the RE motto “the house is the homes largest asset”, if it isnt what they want it to be, or rather NEED it to be, then they are all just like the people who lost their shirts in the tech bust.

But you are right FLU, it isnt the most insightful number.

[DWCAP]

I think some of the point is the sheer number of people who are in trouble. Just like the median price can be horrible at telling people what is going on in the market, the average equity measure can be skewed and not very useful. However it can be interesting in predicting the number of people that will be able to sell if they need to and move, the number of people at risk of foreclosure, and the number of people who may just walk away.

Plus a large precentage of baby boomers are counting on their home equity to retire. How many times have you seen one of those CNN profiles that has someone as a millionare because they bought a house in 96 in the OC but have 50k in savings and are contributing 2% of pay to the 401k and want to retire by 55? They are millionares right! Millionares dont work to 65! If things go back to 2001 or earlier pricing, what are they gonna do?
This is the otherside of the RE motto “the house is the homes largest asset”, if it isnt what they want it to be, or rather NEED it to be, then they are all just like the people who lost their shirts in the tech bust.

But you are right FLU, it isnt the most insightful number.

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