Your house is so underwater you need a submarine to get in the front door

Posted by: Peter Coy on May 6, 2008

underwater.jpg
You bought at the peak of the market. You put next to nothing down. (Maybe you even took out one of those 105% LTV loans to cover closing costs.) Now prices are falling, falling, falling, and you are underwater on your mortgage. Deep underwater, where the strange sea creatures dwell.

If it’s any comfort, you are not alone. Here’s what Zillow.com, the real estate website, says today:

“Of homeowners nationwide who purchased when U.S. home values peaked in 2006, one out of every two (51.6%) now owes more on their mortgage than their home is currently worth.”

You’re in better shape if you bought before or after the 2006 peak in prices. Here’s the percentage of homes that are underwater on their mortgages based on when they were bought, according to Zillow:

2003 7%
2004 16%
2005 42%
2006 52%
2007 45%

Las Vegas may look dry, but from the point of view of homeowners, it’s deep underwater. Zillow says that buyers in 2006 posted a median downpayment of just 2%, and since then, home values have fallen 25 percent year-over-year, so 89.9% of homeowners now owe more than their home is worth.

Stockton, Calif., is worse: 95.8%. No wonder it’s known (unofficially of course) as the Foreclosure Capital of the U.S.A.

Check out what these other blogs are saying about the Zillow report:
Housing Prices-Housing Bubble, Zillow’s in-house blog, and the blog at Active Rain by Zillow exec Spencer Rascoff.

Reader Comments

chris

May 7, 2008 2:56 AM

Same thing happened in Hong Kong years ago. No gov't bailout. People sucked it up and stayed in their home and made the payments. It took about 10 years for it to clear out. Same thing will need to happen in the US.

citracyde

May 7, 2008 8:59 AM

A house should be no more than 3 times your gross income. It's a pretty simple ratio that has stood the test of time.

WTF

May 7, 2008 10:41 AM

OK, so what. My mortgage is less than %150 my gross income, that means what? That is some majic number that protects you from skyrocketing ARM resets?

Idiot.

basleigh

May 7, 2008 11:07 AM

The securitisation of sub-prime mortgages has undermined the world banking system to an extent that few people imagined. Any bank holding a SIV/CDO does not own the title deeds so repossession is not an option. Therefore this derivative is flawed in its concept. Unwinding a SIV must be rather difficult if it includes 3,000 American properties with a majority in default. Note that banks keep referring to "potential" losses; in order to avoid a balance sheet writedown. They dont want to unwind until the final whistle....they think the ball is still in play. Thats called cognitive dissonance?

Joseph

May 7, 2008 11:09 AM

No taxpayer-funded bailouts! I work hard, live below my means, give to charity, save, and invest for the future. I'm sick and tired of ponying up for the stupid mistakes of others. If you were dumb enough to take on a mortgage you can't handle, you deserve to be underwater.

Shawn

May 7, 2008 12:30 PM

3 times may be a good indicator if you live in a non-metropolitan area but I dare you to find a price in 2005/2006 that wasn't 5-7 times your income. With those figures most people couldn't afford a 10-20% down-payment. It is too bad we can't standardize prices rather than letting the area dictate an unbalanced/untrue assessment of value.

Jeff

May 7, 2008 12:30 PM

And the same thing happened in Hawaii during the 90s after speculative Japanese investors drove up real estate there.

jupiterbadger

May 7, 2008 12:56 PM

Where are all these folks going to live if they deed the property back to the lender? There will be a great demand for rentals? Where do you get the rentals? In other words, this is a smaller problem than most of the clueless believe.

Yes, it is a problem and many buyers bought their homes, like their stocks, at the top of the market. That defines the "top". 99% of people who buy their cars on credit owe more than the debt when they drive out of the showroom. Are they going to walk away from the debt.

The economic debt is people make stupid financial decisions. Sould Uncle Sap bail them out of all of them? That would be the kettle calling to pot black.

Devin Serpa

May 7, 2008 1:52 PM

@Citracyde - "A house should be no more than 3 times your gross income."

Do you mean one should never buy a house 3 times their gross income. OR Government should limit house prices?

CriticalThinker

May 7, 2008 1:56 PM

I don't believe the statistics. I think the press is exhibiting their inability to think critically and analyze the statistics they are receiving. I am sure the situation is much better than these statistics are portraying. I am not sure why the data services and the press have such a jihad against the American homeowner and seem determined to drive our economy into a recession. (Yes, Virginia, we are not in a recession yet, despite the news outlets' best efforts (or should I say best negligence)).

Ashley

May 7, 2008 2:18 PM

If you sell at sky-high prices like what the South Bay and OC and Florida or Vegas has seen, this should come as no surprise. My question is people are not that stupid. When they bought, they knew perfectly well what was happening. They did it for selfish reasons - viz. Cashing out on the wave of rising prices. As with all bubbles, this one burst too. One would think folks learn. The same dumb attitude is in play with oil futures. Have we gotten to be a value-less society that has to get high at the cost of someone bleeding. Ouch. I believe there is a word to describe it and it's called "capitalism"!

Jay Patel

May 7, 2008 3:27 PM

Governmane bailout will create a bigger bubble next year. In a capitalist country, if people bought a home to profit from it, they are the one who need to take losses too if they are proved wrong. If government helps those, what about those losers who lose in stocks they buy?
If Government allows free-ride (if profit, you keep it; if it is a loss, governement will take it), it is not the wise use of tax-payers money. Plus, next time, everybody would jump on because you do not have to lose anything

Moses

May 7, 2008 3:31 PM

I am in the situation describe above. What can I do? I bouth my house in February , 2006 for $440K. There are 3 foreclosure in my subdivision listed between 330-350. That's $100k below what I paid for my House. Foreclosure has taken a big chuck out of my house value. What solution is available out there? Did I have to continue to paying for the house 'underwater' just because I can afford it? or return the key to the lender?. It is a very bad situation out there and hope somebody will come up with a solution. We have become culprit for the big Bank greed. The fed is bailing out the Big bank who created the problem out of greed. When will the FED bail out innocent home owner like me?

Paris

May 7, 2008 3:35 PM

I personally,love watching this.I still remember 2005,when so many of the folks I knew were snatching up real estate in droves with those 105% ARMs...claiming "real estate in America will never go down"...and that "they would be multi-millioners in a few years"...So,where are your millions now?In the toilet???Hey,dont forget to flush,LOL

SF Bay Area Gal

May 7, 2008 3:35 PM

Unfortunately the 3x your gross income rule won't work in the San Francisco Bay Area, where the median home price was in the 750k range in mid 2005. Even today, it has only dropped by about 20%, leaving most homes outside the reasonable purchase range.

We've stuck to the rule essentially, buying a 350K townhouse, but in 2005, even our (now $375K) townhouse was selling for $510K, and that's in CoCo County.

Brian

May 7, 2008 3:50 PM

A house should be no more than 3X your home???

How many homes can you find for 140K - about 3 times averahe salary. You can't. Inflation. Incomes are not getting higher to meet growing prices of homes as well as other needs.

Bubble_Pop

May 7, 2008 3:51 PM

We will all end up paying for this mess because according to Clinton & Obama it's now the government's mandate to keep housing prices high in order to bail out all involved. Thank you Mr. Greenspan.

Good

May 7, 2008 7:12 PM

Let those greedy homeowners and bankers go bankrupt.

Midwest

May 7, 2008 10:36 PM

The housing market needs to lose steam naturally, even if it means thousands upon thousands of foreclosures. Those that over extended themselves largely did so with their eyes wide open and they deserve what they asked for. Those that speculated and drove home prices through the roof need to feel a little of the pain they caused the market as a whole. Because of greed, real estate reached unsustainable heights and the downside is that tens of thousands of people are going to realize they're way in over their heads.

Expert

May 8, 2008 12:56 AM

You should not pay more than 7 times the yearly rental income a house produces. Those who forgot this rule, are now way underwater.

checkmate

May 8, 2008 2:36 AM

Dont they walk away from their loans in Hong Kong.
Thats what we do here in USA.

elmo

May 8, 2008 2:51 AM

You're kidding yourself if you think the average american has the same financial integrity as the average hong kong citizen

Michael of Huntington Beach

May 8, 2008 3:24 AM

It is all about Greed and Denial. On the upswing, people were blinded to the truths of economics due to Ponzi Greed. On the downside, Denial causes people to maintain unrealistically high selling prices and hence never selling. Now they can't sell at any price and are deep under water and are crying foul. They can't come to terms with the fact that they were speculating. More to the point, they were gambling. Ask yourself this, when the guy down the street loses twenty thousand dollars at the local casino, does the whole neighborhood cry with him? No way! They quietly call the guy a stupid fool behind his back... Everyone that bought any year near the peak was a fool! Scuba diving with goggles manufactured by Blind & Denial LLC is definitely not recommended.

George

May 8, 2008 3:55 AM

In HK, there are laws keeping you from walking away from your upside down mortgage. In the US, people can simply mail in their keys and hence the climbing foreclosure rate, which further depresses housing price.

Amok

May 8, 2008 10:06 AM

Chris is bang-on...was there in HK.

Van

May 8, 2008 4:44 PM

3 times your gross income is impossible in california. not everyone can have a six figure salary.

Paul

May 8, 2008 5:05 PM

Any government bailout will only make the problem worse by rewarding those who took out more than they can afford while the rest of us who are smart with our finances foot the bill (through our tax dollars). And as Citracyde pointed out, there is no way that housing prices can sustain the levels they have based on the average family income. 3x ? I'm not sure of very many places that you can get much house for that anymore...

Duncan

May 8, 2008 5:08 PM

In addition to affordability - 3x your income, a property is only worth about 100x the monthly rental rate. Here in San Jose, CA, houses are STILL 300-400x monthly rent.

Poor Richard

May 9, 2008 9:16 AM

Don't measure up with your wallet when your credit is short.

John Brown

May 9, 2008 6:50 PM

Don't trust swindling, shyster bankers who, in search of short-term commissions, will prevaricate any nonsense to any potential buyer.

No proof of income? No problem - we won't even ASK!

No documentation proving employment? What's the point - as long as I get mine.

fredo

May 10, 2008 6:44 PM

Purchasing a home at no more than 2X your annual household income is a better rule to follow.

Thebe

May 15, 2008 10:40 AM

I'm with Fredo. We bought a house in 2003 for 2.5X our annual income and we still went underwater. Last year a job change forced us to move, and we couldn't sell the house. We had to pay both a mortgage and rental payment for 10 months until we pulled off a short sale in March. There are no hard-and-fast rules in these situations.

steve

May 25, 2008 11:41 AM

Let me say this about our current situation. We as Americans are the biggest borrowers of all time. We have used our credit system to provide us with all the toys, luxuary items, and
necessities through our easy credit system. Our real GDP has has not been
fuel by real wages, but through credit cards and home equity. The old addage buy now and pay later. The later has arrived and the green stuff has stoped flowing. People like my parents built this country. They lived in their house for fifty years, never had any credit cards, and knew the value of a dollar. People forget this,and think that they got the raw end of the deal. Two thirds
of the Americans are overwieght. Why,
we are just be consumers. Couple goes to In & Out Burger, and the bill is eight dollars and change. They whip out a credit card, and sit down and consume their meal.If you don't have rhe money stay home, if you don't have the down payment for a house then don't buy it. As inflation continues to increase, the average American will fall by the way side. The ignorant worker takes 10% of is wages and puts it in a 401K. He or she wants to see it grow at double digits per year. That's great but he or she is not smart enough to figure out what the real effect is. OK here is the real senario. You make 50K a year, and you invest 5K in your 401k. Your happy that your 401K has earned double digits for the past year, but what you fail to realize, is that after taxes your true spending money buys less, because the very companies you have invested your retirement money, have increased prices,
laid off people and are outsourcing to jobs to foreign countries to make you a profit. You do the math, 5K makes 10% or better, but your 35K to 40K of real spending money gets hit with double digit inflation. These very same companies will do whatever they have to do the make more money and most often at the expense of the eventually consumer. Word of caution we are in a
most difficult time, that will take time to repair. in order to truly survive on this present situation, you need income in excess of what you spend,
and enough liquid cash to survive for at least a year without a job. Most Americans today have to rely on some type of credit, or familt help to make ends meet. It continues to get worst, as gas prices, utility cost, food prices
and clothing continues to rise, which
leaves you short every month. Inflation and over spending are our worst enemy. amd when we can moderate these to enemies, we will return to a more normal stabilty. Remember you can never have the best of two worlds. Come November, remember to vote for that person, who will the US a better place to live.

Devin Serpa

May 26, 2008 7:33 PM

2X your household income? So a couple would have to make $200,000 annually to buy a house in the Bay Area? That's insane. How can anyone afford a home?

payupsuckers

October 15, 2008 11:15 AM

The Mortgage Forgiveness Debt Relief Act of 2007 removed the last incentive for borrowers to remain in “their” homes. This law must be rescinded and replaced with the Patriotic Mortgage Repayment Act of 2008.
The Patriotic Mortgage Repayment Act of 2008 - If a borrower defaults on a mortgage and the market value of the collateral is insufficient to repay the money borrowed, the Treasury will recover 105% of the residual borrowed, but unpaid amount using IRS collection methods and interest schedules. Such a law would prevent the general population from bailing out the speculators that purchased more house than they could reasonably afford. These wannabee flippers took grandma’s money out of the bank, now the bank has collapsed the the FDIC is having to pay off Grandmas. The least these deadbeats should do is repay 100% of grandmas’ money to the treasury plus 5% as a handling fee.
It should be trivial for the borrower to meet his obligation. After the foreclosure sale recovers 60% of the original loan, the payments on the remaining 40% loss should be well within the budget of even the biggest speculative wannabe flipper real estate genius that bought at the top of the market using grandma’s money.
Buying on margin with no downside risk must be removed to prevent the debacle from bubbling and bursting again. House prices should be marked to market quarterly. If a mortgage borrower's equity is ever insufficient to cover the gap between value and principle the creditor should demand immediate additional funds or immediately foreclose before the squatter further destroys the value of the property.
McCain has flipped from his personal responsibility stance to “As president of the United States ... I would order the secretary of the treasury to immediately buy up the bad home loan mortgages in America and renegotiate at the new value of those homes -- at the diminished value of those homes and let people be able to make those -- be able to make those payments and stay in their homes.”
Obama the topper will soon reveal an even more outrageous save the home “owners” bailout principle reduction plan.
These statements will serve to immediately increase the default rate.
1. Get behind on your mortgage.
2. Drain your bank account by paying extra on your Escalade.
3. Wait for Washington to change your mortgage payment like magic.
4. Cha Ching mo money fo big screen, big rims and gold teeth.

SgtFear

October 31, 2008 1:37 PM

Interesting responses-especially the ones that suggest lack of responsibility, which I'm sure exists. But a lot of folks are like me- I am 50, live in Cape Coral, put more than 20% down, have excellent credit, no 105% ARM. But my house is over $80K upside down (and dropping), and every mortgage payment is even more money down a depreciating rathole The bank won't talk to me until I'm in foreclosure, so I'm walking. I will lose my good credit and my inheritance. Big deal. I've paid taxes for so long for so much governmental crap, its payback time.

Corey

December 28, 2008 8:00 PM

I am one of the unfortunate people that purchased a home in 2006. I had a job transfer to Las Vegas and we quickly found out that we would be paying more for a home than what we wanted, but what choice did we have. We put $40K down on a $340K, 3 BR, very average home. Our $300K loan payment is affordable, however that is not the problem. Our home value decreased from $340K to $180K seemingly over night. I have built up an excellent credit rating by pinching pennies and paying my bills. I feel have done nothing wrong. I am now upside down $120K and this will not change for quite some time. Here is the reality that is setting in: we will not spend a penny on improving our home. We will not buy carpet, appliances, cabinets or even a gallon of paint. The $120K that we are upside down is making us sick. The thought of paying $2100 per month on a negative asset seems rediculous. We are basically screwed. If the government comes up with a program to reduce our loan balance (bail-out) to today's values, I will jump on it in a second, but won't feel good about it. I can not help feeling that thieves stole our home's equity from us.

David

January 6, 2009 3:17 AM

I'm in the same situation as Corey. Bought my house in Mid 2007 from a couple that was retiring. They bought the home for $175K in 1994. According to them the house was worth 450K in 2006.
Did my research and made an offer for 380K, put down 20% down payment and I can still afford making payments. I make well over six figures.

Here's the kicker as of Jan. 09 my house is worth 180K!!! and prices are still declining in my area! What the F!!!! Home prices in my area aren't going back to early 2000. At this rate my house will be less that what the old couple paid for. This shit is real and you can't blame people who are walking out. I'm thinking of walking out and renting a one bedroom and save up a year or two and buy a house out right!!! That's right! If home prices keeps dropping to where you folks think where it should be then we are in trouble. Why? If i'm thinking of walking out and buying a property out right. Others will be thinking of the same thing. Its no longer home ownership. Its business.

Marie

January 12, 2009 10:39 AM

I'm in the same leaky boat as you David.

I bought a home in March 2007 with a conventional 6.5% fixed rate mortgage and a downpayment of around 15%. I'm a professional with a solid salary and the payments were reasonable for me, a bit high but the conventional wisdom was that things were dropping but would pick up in a couple years. I was tired of tossing money away in rent, and living under the restrictions of a rental home. Unfortunately, no one predicted the extent of this horrible mess. Friends were also buying around this time (spring 2007), and with the plan to stay in the home here in South Florida (hammered by the bust) for several years, I didn't see a major issue with it. At this point I am at least $50,000 underwater with no end in plunging prices. My boyfriend and I are interested in moving, but we're stuck. Each time I have to pay for a new appliance or some repair, it's like a slap in the face. If it gets to the point where I am over $100,000 underwater on my mortgage (which is likely given than another 25% drop is predicted here in Florida over 2009-2010) I don't know what to do!

sarahj

January 25, 2009 6:23 PM

I am totally with the last 2 or 3 people as I am in the same boat. I bought my home in march 2006 and can more than afford it. I bought it for 300k and now it is worth maybe 180k or so maybe even less. The problem is why do I want to continue to pay for a house that needs "work" done to it and I will never get that money back. I bought this home planning on only staying for 3-5 years. Now I am ready for a bigger home, I have had 2 children and am outgrowing the current home I am in. So what can I do? I hate how people say all these people can't afford their homes and this is why the housing crisis is happening cause that is not always the case. Well I can and I sure am thinking about walking out.

Doug

February 18, 2009 2:07 PM

UNDERWATER!!!!! These are great/terrible stories and I am sure there are millions more out there. Folks who put down 10%-20%, have good jobs, good credit, played by the rules and are being negatively impacted by fraud in the banking industry, Wall street, realtors, appraisers, builders, bogus borrower's. IT'S B.S. I too am underwater by about $15K. Paid $243K in 2005, owe $215K, house is worth $200K. THIS IS BS!! I say contact the bank, try to work with them, but if ypu cannot come to terms(i.e. short sale agreement, reduction in princial, deed-in lieu) WALK AWAY!!! If you can afford to buy another home (at these drastically redcued prices - say .40 to .50 on the 1.00 - do so. BUY AND BAIL. I 'd rather have bad credit for a few years, then deal with a 30 yr problem!!!!

David

February 19, 2009 12:04 AM

I'm with the last few posters. My situation is that I got divorced in early '07, put the house up for sale right as the market began to dry up and got nowhere. In early '08 I refinanced solely to get the deed/mortgage out of joint ownership into my name. In doing so I took NO money out in the refi - just what was needed to pay off the previous mortgage - while buying out the ex with cash. I actually planned on living there for years to come but my company was bought out and now I must move to California or become unemployed in South Florida! My agent suggested I stop paying right away and do a short sell but I'm hanging on for a while and trying to rent (even though that just doesn't cover things!). I can barely keep all this going so I'm beginning to wonder not if, but when, I will have to walk away. If the bank would mod the mortgage to market value I think I could hold out even while paying California rents but it seems they're unwilling to talk unless you are way behind and your credit is already screwed...

Eleanor

March 3, 2009 1:28 PM

I'm tired of all the people who pontificate about "greedy" homeowners "getting what they deserve". I was conscientious and responsible. My husband and I bought our modest first home for $212,000 with a nice fixed-rate mortgage we could comfortably afford. We both work full time, and our neighborhood is lovely. Someone just around the corner, however, foreclosed, and the bank put their house up for sale at an insane lowball price (far less than other houses in the area have sold for recently). So now our house is worth $40,000 less than we owe on it. We are stuck. If either of us loses our job, we will be in serious trouble - and it's not like that is unlikely for anyone in this economy. We aren't the only ones in this position. We weren't greedy, we didn't do anything wrong, and we are very very angry. Not at the person around the corner who foreclosed - those poor b*stards probably lost a job or had a medical bill or something equally unfortunate. Nope - we're angry with every legislator who ever voted to deregulate - everyone who thought it would be just fine to dismantle the regulations put in place after the Depression and let the banks regulate themselves. They caused this unholy mess. I'd also like to give a shout out to the rotten jerks who came up with the credit default swap idea. Obama's folks should immediately declare all credit default swaps null and void - and illegal - and everyone who gave money to anyone else to buy one should get that money back and not a penny more. Furthermore, banks should be forced to work with homeowners who are underwater whether they like it or not. I'm sick to death of their foot-dragging and hesitancy. They caused this dreadful mess, and the time for putting up with their nonsense should be long past.

Conrad

March 6, 2009 1:32 PM

You are not alone Eleanor. I am at my wits end. Our lifetime of hard work and savings has been completly wiped out. I was just laid off for the first time in my life. We have no choice but to move in order for me to get a job. The realtor said that we owe $90K more than our house is worth. Three years ago it was worth over $70K more than we owe. Where did the equity go? It got flushed down the drain with the stock market. The predator brokers and investors all made their fees by writing mortgages by the millions with no money down. Then they would defer 6% to 8% of the interest, and add that amount to the principal (negative amortization) making the monthly payment "affordable" yet knowing every one of them would eventually default and crash the housing market!! Its payback time. If I have to sell my house at a loss, the bank will eat it. They created the mess and it is being felt around the world.

Jake

March 9, 2009 2:59 PM

I don't understand why the "Bailout", "Stimuluis" etc.. plans are not addressing the real problems above. The latest gov't plan is weak and not reaching the people above. We were initially told that "mortgages" were the problem. One year later and almost 2 trillion dollars but only 75 billion to the problem "mortgages". I don't understand but I listen to economists daily who ask the same question to each other "when will this end". The people above seem to me to be the kind of Americans that will go forward and succeed with some help. I do understand the severity and scope of the crisis and I'm aware that all can't be helped. I just don't see why a few Gov't people get to decide who gets help. We are a democracy and the greatest country ever b/c of that. Lets put this issue to rest with an all encompassing solution that attacks the problem. I think we are tired of no details and leaders who skirt the real problem.

bob

March 27, 2009 8:00 PM

I just wish the government didn't bailout the banks. Now the banks don't want to modify loans.

If the government stayed out of it the banks would have been willing to write down principle.

What a cluster!

bob

March 27, 2009 8:00 PM

I just wish the government didn't bailout the banks. Now the banks don't want to modify loans.

If the government stayed out of it the banks would have been willing to write down principle.

What a cluster!

Bishop

April 16, 2009 3:06 PM

I am utterly disgusted with this housing issue. I am a very responsible homeowner. Bought a house that was affordable to me ($235,000 in Jan. 2007. I stayed within my affordability and yet am screwed bu this housing crisis. My last home assessment came in at $78,000. I am at a wits end. My home has decreased in value by more than $150,000 in two years and I originally purchased it with about $20,000 equity already there. At this point, I feel very betrayed and abused by banks and the gov't. My credit is excellent, but I fear that may not last. I am seriously considering just "walking Away" from my housing mess. Why pay for a mortgage of nearly $2,000 a month on a place that is now barely worth more than a BMW automobile? Again, I definitely feel for all others underwater as I am. Hurts to the bone.

Joyce

May 1, 2009 10:18 AM

We are in the same boat. Bought a home in FL that we could afford in '05 for $245,000. Now it's worth about $180,000. My income has been reduced, but my husband has a good job, however, we are throwing good money after bad and we are VERY close to retirement age. We have lost virtually everything. Do we take the remainder of our retirement to save a house that is underwater or do we bail? If the govt. wants to fix this mess, KEEP people in the homes they love.

Why not "shortsale" these underwater homes back to the owners who love their home instead of a NEW buyer or investor? This would keep families in their homes? The bank is going to lose money on a shortsale anyway, why not to the homeowner? To me it seems like everyone wins that way. Am I wrong?

FL Living

May 26, 2009 5:24 PM

TRUE Joyce! I think that the bank should have an assessment done asap, give you the option to "BUY" your home at what a short sale buyer or investor would buy it at, restructure the loan so it's affordable!!!!

joe

June 18, 2009 2:55 PM

Joyce and FL Living - I think you're missing the point. If the bank short sells back to the person who made a bad investment the BANK loses as do the investors in the bank and the taxpayers that are bailing out the bank. Take responsibility for your own mistakes. You bought at the top. You can't afford your mortgage. You should lose not everyone else...

Deanna

July 12, 2009 4:57 PM

To all the "responsible" people who didn't do anything "wrong". Neither did everyone else on the street. The street that has 5 empty houses, 6 for sale signs in a block of 20 houses. You may think it's all the irresponsible people's fault, but it is OUR responsibility now.
We bought our home for 570K in June 2006. When we bought and were stimulating the economy no one called us bad for buying then. No one mentioned a thing. Now, sitting in the same house and having a value range of 220-272K, you bet I am scared and angry. How dare you insinuate that I brought this on myself? I can afford any number of payments on this mortgage. I was not planning on living here until I turned 90 however. Breaking even to move to a retirement area would have been great.
I will not ever be able to do that unless I walk away. Or the government figures out a way to set a legitimate bottom on the market and resets my principal amount. Don't you think for a second that your responsibility kept you free from this impact. You are in it with everyone, and need to participate in finding a way out for us all.

Marie

July 31, 2009 12:41 PM

Found this article again. I had posted above about being around $50,000 upside down in Florida. Now, a tidal wave of foreclosures has sunk the house's value to $170,000, $100,000 less than I paid when I bought it. Some people saw an old listing on my house when I was trying to sell (when I thought I could) and lowballed me at $150,000. I owe $250,000. And South Florida continues to drop, albeit a bit slower. :( I can't refi under the new 125% plan , I am too underwater now. Can't walk because Florida law lets the lender come after you. Awful.

underwater

October 6, 2009 4:23 PM

If the banks were not dumping properties all around me for 50 cents on the dollar (or less) then maybe I would have had an offer on mine during the 2 years it has been listed after I relocated because of my job. I have carried the mortgage without ever being late and after paying on an empty house for 2 years, the bank would do absolutley nothing. I stopped paying 3 months ago and called the bank again. All they wanted to do was make me current on the loan. Sorry, I will pass. I have told the realtor to drop another 20K off the asking price. That puts it at 50K less than the loan amount. I am going to short sell it and move on.

Robyn Govert

October 12, 2009 11:36 AM

Don't be bitter everyone! Its not the homeowners faults! I personally believe it started with the greed of the banks, and then the support of high up officials on Wall Street and in the gvt. Now look at us!

I have some good news for most of you on here and anyone else who reads this! You can refinance your upside down property for 90% of the value of the home. Really and truly. It doesn't mess up your credit, you're not responsible for the balance, and you get into a secure loan at a fixed rate. Its possible and its happening.

One company will present it to the lender in such a way that there isn't even much negotiating taking place, it makes that much more sense for the bank to do it. Don't foreclose, don't short sell, don't bitch. Refinance it and then do WHATEVER YOU WANT with it!

Refreshing, eh?

TBostwick

November 2, 2009 4:37 PM

It's so refresihing to hear folks who aren't in bad or poor economic areas, state "If you bought a house you now cannot afford, then you ought to go underwater". What about a house that is over 1/3 paid, that is EASILY affordable
originally purchased for $80,000 (very reasonable, frugal, etc.) and is now worth less than $20k!!! Hmm... this doesn't fit into your convenient calculator does it. The reason for the move? The poor economy has hit soo hard that practically everyone in neighborhood after neighborhood has left and let their houses get reclaimed by the banks. What's moved in? Crime, transients, copper-stealing thieves who'll break-in while you're sleeping. What's the solution? Rent it
Buy a new house then forclose on the 1st one?

Sugesstions welcomed

Objective Thinker

November 29, 2009 12:17 PM

Critical thinker is funny. Just because he is not in any financial pain must mean that the entire country is perfectly normal. Come to metro-Detroit and see blue collar suburbs with 20% vacancy rates, see houses that were bought for 140K in 2000 now worth 10K, nope no economic downturn here. Oh I get it, just move, sell a house with 85K owed for 10K and move the family and the infirm mother who needs a hospital bed, and move to some neocon cesspool that housing prices never increased because they hang nooses in trees next to burning crosses. I guess I will have to get that rebel flag tattoo afterall.

Joe K

March 18, 2010 2:00 PM

Unbelievable what I'm reading on here.

I received my discharge from the Army in 2007 and moved back stateside. (Lived in Germany) I had 25k in the bank and had every reason in the world to take a few weeks off. But, being the financially responsible and hard working person that I am I started working the very next day after my discharge. I never took the easy way out- collecting unemployment and using VA programs to buoy my discharge woes. I just worked hard and continued to do my part to be a productive member of society. For 3 months I was living on my parent's couch trying to figure out what I was going to do for a housing situation. I thought about renting but didn't want to throw my money away. Homes were affordable where all my old friends were- so I moved there.

I bought a 4 BR 3 BA 1900 SQ Ft home for 155k on a 5.25% fixed rate loan. By all means it was for the most part a sound investment. I knew the housing market was dipping, but I bought in with 20k instant equity and was assured by various professionals and homeowners alike that the housing market was far from likely to dip below the 145k range for my house. I could handle 5-10k in debt if need be.

Fast forward to 3 years later and now the same model home down the street is selling foreclosed for 85k. My investment is worth nearly 50% of what I bought it at, one of my friends foreclosed, the other short sold and I can't help but wonder if all these people saying "tough luck" are renters. I'm 28 years old, served my country honorably, came home to start a life and build a future, and now I'm 70k in debt with bags under my eyes and the promise of a full life squashed under the weight of an overwhelming debt scenario to the point that it affects even my love life. Despite layoffs I've continued to be productive and have worked to further my career, never missed a payment, and have still pursued my education the whole time. Yet I'm getting bent over every single day by the foreclosed properties, bank bailouts and irresponsible homeowners who walk on their loans. What reason could I possibly have for continuing to be honest and making my payment? Each and every single day I wake up my integrity and honest struggle allows this selfish society and its financial caste system to bend me over without the courtesy of a reach around.

Quite frankly I'm sick of it. Responsible action needs to be taken on the part of the banks, the government, and the homeowners alike. I'm conservative in my political beliefs, but even a hard headed conservative can see where a system without regulations or fail-safes got this country into a VERY bad spot. Also- to the people who say "tough"- you all act like everyone knew. All I can say to you is, "Where were you then??" You weren't flapping at the gums in 2006 or even 2007 because I would have seen it. I trolled the internet for weeks before I made my purchase. Everyone knew there was to be a dip, but hardly anybody expected it to be on this scale. And if you did, then it's your fault for not being loud enough and making your voices heard. So, in that essence, yes... you do share the responsibility of our debt burdens. You could have saved the country with all your wisdom and foresight, but you kept your mouth closed and allowed the entire country to plunge into a financial crisis. More than likely you didn't have that foresight, though. You're just forgetting that hindsight is 20/20 and everything you say now is based on knowledge of the now, not of the then.

Anyways- read the comments of these homeowners in troublesome situations. They all seem like fairly intelligent people who clearly have an ability to articulate their dire situations. These are not the types of individuals who walk blindly into dark caves. These are intelligent, responsible, hard working FELLOW Americans. It's time we start realizing that and working together as a country to relieve the burden.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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