20% of mortgages are upside down

[disneysteve]

I heard a report on the radio on the way home that said that 20% of home owners with mortgages were upside down on their loans as of 12/31/08. The person in the report did say that the numbers are skewed by certain areas of the country like California and Nevada where home depreciation has been the most severe, but still, 1 in 5 people owes more on their home than the property is worth. That's a pretty alarming statistic. At least I thought so.

[jIM_Ohio]

I think anyone which bought with less than 30% down in my area (including myself) is in same situation.

Bought for 352k in 2005, now appraises at 290k. Lost almost 17% thus far (assuming I could sell for 290- which I think is a LONG shot).

[red92s]

I wonder what portion of that 20% is due to removing equity though HELOC's.

[GREENBACK]

I think anyone which bought with less than 30% down in my area (including myself) is in same situation.

Bought for 352k in 2005, now appraises at 290k. Lost almost 17% thus far (assuming I could sell for 290- which I think is a LONG shot).

I live a few hours north of you but I believe home values have been fairly stable in my area. I know my house is appraisig for more than I bought it for. I guess these things vary even within an individual state.

[disneysteve]

I wonder what portion of that 20% is due to removing equity though HELOC's.

Good question. They didn't mention that. They were focused on the drop in property values. In some places, like Las Vegas, home prices are down 50% from their peak. That puts a high percentage of folks upside down even if they put down good down payments and never borrowed against their equity.

[disneysteve]

I live a few hours north of you but I believe home values have been fairly stable in my area. I know my house is appraisig for more than I bought it for. I guess these things vary even within an individual state.

I live in the Philadelphia metro area and they were very clear that these stats do not reflect the situation in this area. We didn't see the huge run up in values and subsequently haven't seen the big drop. We just weren't part of the bubble. Also, the local economy is fairly stable. Still lots of new construction going on, new stores and restaurants, etc.

[MonkeyMama]

I read today 40% homeowners in Sacramento underwater. $2 mil people under water on their mortgages in California.

Most of the homes in our neighborhood that foreclosed were because they were purchased at the peak ($600k paid for homes that sell $300k today). Most of them literally foreclosed within months of purchase.

Most of the people we know personally who lost their homes, bought in the 90s (for VERY little) and tapped way too much equity. Seemed to be a combo of hardship and money stupidity. Biggest spenders but job loss/disability is why they borrowed so much (no savings to fall back on).

You hear the statistics most bankruptcy is usually due to job loss and medical debt. Duh. If you never had a job loss, disability, or any other kind of setback, you'd never fall on your face, right? You can juggle things for a long time otherwise. I don't think this proves people aren't living way beyond their means. (Because around here most people were for a long time - clearly!)

[red92s]

Good question. They didn't mention that. They were focused on the drop in property values. In some places, like Las Vegas, home prices are down 50% from their peak. That puts a high percentage of folks upside down even if they put down good down payments and never borrowed against their equity.

Right, I certainly understand there are other ways of being upside-down than removing equity by borrowing. Where I struggle with the math is that I have a hard time believing that 1 in 5 homeowners bought at or near the market peak. Maybe I underestimate how much people are moving about the country and doing the property-swap game at any given point in time. Someone who bought 8, 10, 12 or twenty years ago would find it very to be underwater unless they removed equity.

[Joan.of.the.Arch]

Someone who bought 8, 10, 12 or twenty years ago would find it very to be underwater unless they removed equity.

Example: I bought in 1993. For me to be underwater, values would have to drop back to those of about 1958.

I do keep trying to pay attention to all the ways of quantifying what is going on, though, as a way of trying to understand the magnititude of the problem.

[disneysteve]

Where I struggle with the math is that I have a hard time believing that 1 in 5 homeowners bought at or near the market peak. Maybe I underestimate how much people are moving about the country and doing the property-swap game at any given point in time. Someone who bought 8, 10, 12 or twenty years ago would find it very to be underwater unless they removed equity.

There is a story in TIME this week or last week trying to put a personal face to the foreclosure problems. They tell the stories of two people who are at risk of losing their homes. Their intent, I believe, was to make it sound like these people did everything right and things happened that were beyond their control and led to them not being able to keep their homes. In both cases, though, I don't think that's true at all. One guy got injured on the job and couldn't work. The problem was he had borrowed each time his property value rose to get money to buy equipment for a side business that he had started. The other person was a woman who probably bought too much house (they didn't give specific numbers in her case) and had also tapped her equity along the way.

So if TIME was trying to make these people seem blameless, they failed IMO.

[LivingAlmostLarge]

red, it's more likely the reason for 20% of people, is that now people bought with 0% down. People also bought with the idea of flipping and making "easy" money. Thus it's possible the majority of the people buying couldn't afford it.

[GrimJack]

I saw the number stated differently - 8 million mortgage holders are under water.

California appears to have lost 1.2 trillion in value alone.

Here is a quick look around the country.

[thekid]

20% nationwide mortgages underwater is an incredibly bleak figure.

Outch!