More homeowners will have negative equity (owes more on the home than it is worth)
By Daniel at 12 August, 2009, 1:09 am
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Thousands of families are at risk of plunging into negative equity if house prices fall by even a small amount, experts warned yesterday.
Those who took out huge mortgages while property prices were soaring have been left exposed by the market downturn.
How many of these will ultimately end up owned by the banks who will take $50k to $500k+ losses on millions of homes?
Almost half of US property owners could face negative equity by 2011
“Falling residential property prices in the US will plunge millions of more home owners into negative equity by 2011, according to a new report from Deutsche Bank.
It has published figures which show that around 14 million property owners were in negative equity in the first quarter of this year and predicts that will rise to 25 million by the first quarter of 2011, some 48% of all mortgage holders in the US.
While subprime and option adjustable-rate mortgages are the biggest source of underwater borrowers in the current property market, Deutsche said a larger percentage of prime conforming and prime jumbo borrowers will also end up with negative equity.
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Increased defaults in the middle class will suppress consumption, added Deutsche, further slowing housing recovery.
Analysts point out that the current housing recession is unique in that it was brought on and perpetuated by a number of factors including unstable loan products, crashing housing prices, and unemployment.”
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http://www.propertywire.com/news/north-america/us-property-owners-200908103404.html
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