1 in 6 homeowners are upside down now...

[PrincessFiona]

http://www.msnbc.msn.com/id/27089919/ht ... /27089919/

This is a great article about the issue of home prices right now.

Our home is down in value 95,000 ..which is nearly 25% of the original value of our home. I can't imagine how we will ever recover this.

What do you guys think is the answer, or is there? I know John McCain talked about buying the difference or something and re-assigning mortgages, but I can't imagine that would work or even be feasible. I feel so upset about the fact that we have bailed out wall street (I know, the crisis might even be worse than it already is) but that the rest of us are kind of just...stuck.

We can't consider another job and moving...nothing. We are also onto the 3rd foreclosure in our neighborhood.

Re: 1 in 6 homeowners are upside down now...

I don't think it will get better until the foreclosures end. I'm not sure that I get the McCain plan. I'll have to listen again. It would work for people who could pay the new mortgage but there is still the sticky issue of people who can't afford it no matter what (and I don't think we should buy enough for them to be able to). Help them sell before foreclosure?

[Deebs]

Re: 1 in 6 homeowners are upside down now...

We are calling our bank this morning to try to renegotiate our interest rate. I have two friends who have successfully done this (and there was a woman on the Today Show this morning that renegotiated from 7% to 4%). We figure, it won't hurt, and might help. Our bank will still get plenty of interest from us!

[HouseofWool]

Re: 1 in 6 homeowners are upside down now...

DH and I were talking just this morning about how glad we are that we didn't end up buying for med school. We would have lost out completely. But, we keep hoping that the housing market will start to steady out in the next year or so, because we would really like to buy our first home for residency in June/July 2009.

I feel so badly for the people who made smart decisions and have had the value of their homes drop out. But on the other hand, I am supremely irritated that banks made bad credit decisions and it is has thrown the entire economy into the tank.

[McPants]

Re: 1 in 6 homeowners are upside down now...

DH and I were talking just this morning about how glad we are that we didn't end up buying for med school. We would have lost out completely. But, we keep hoping that the housing market will start to steady out in the next year or so, because we would really like to buy our first home for residency in June/July 2009.

I feel so badly for the people who made smart decisions and have had the value of their homes drop out. But on the other hand, I am supremely irritated that banks made bad credit decisions and it is has thrown the entire economy into the tank.

I guess I and the gf are in pretty much the same situation. We are very relieved not to have bought a place yet and are looking to make a fair deal in a few years' time, when she's done with med school and I've finished my PhD (fingers crossed!).

I know quite a few of my fellow PhD-students from back in Sweden who borrowed huge amounts of money in order to buy overpriced apartments and houses in the last couple of years, hoping that prices would keep going up. I fear they're probably hanging on by the fingertips now.

[ladymoreta]

Re: 1 in 6 homeowners are upside down now...

I think the only thing that will work is time. We need to aborb the surplus homes (I've read about 1 million newly constructed homes are empty right now) and then the values will start to appreciate at the historical rate of 3% per year.

I think you're right. As much as I cringe whenever people talk about their homes being an investment, this would be a case where it makes sense to think of it that way. You don't sell when the price is down because you haven't really lost the money until you sell. The person in the article who was talking about walking away from their mortgage even though they could afford it, just because the price went down, is a lot like the people who are freaking out and withdrawing their 401ks.

I think part of the problem with absorbing the surplus homes, though, is that they are not reasonable homes for the majority of the population, so the prices on them need to drop a lot before they will all sell. According to Wikipedia, the median income for men in 2007 was $45,113, and $35,102 for women. This means the median income for a working couple in the US is $80,215. The maximum amount of your income recommended for a house payment is 28%, which would be a payment of $1,872 per month. Playing around with a mortgage calculator shows that the maximum loan for that couple should be about $275,000. I doubt that most of those surplus homes are anywhere close to that price.

[SuzySunshine]

Re: 1 in 6 homeowners are upside down now...

I'm not sure if we're upside down or not. We bought on a 80/15 which included closing costs and the 80 is a 7-yr ARM which expires at the time we'll be selling. Luckily the market here has been pretty stable and I've been carefully watching houses in my neighborhood, they're selling at close to what we bought for. Which means with the money we've put into our house (carpet, windows, tile) hopefully we can at least pay off the 2 loans but I don't expect us to make any money. We seem to have bought in the price range that is stable here, the foreclosures seem to be in the next price range up here. Its probably actually a good thing that we'll be moving for fellowship or we'd have to refinance and we'll definitely be renting for fellowship and hopefully saving for that down payment for our first "real" job house.

[Vanquisher]

Re: 1 in 6 homeowners are upside down now...

Ummm, yeah, we have to move this year, and I am terrified. I want to be able to sell my house! The market never got crazy or completely out of control here, but there are still forclosures everywhere.

Our house was built in 1996. The original owners paid 154K. We payed 165K in 2004. What does this all mean for us? I would be happy to sell this house for a profit, but I am more worried about getting our money back and out of this house. I had an agent come and look at it a while ago, and she doesn't think it will be a problem to sell our house because of the price range it is in, but, my neighbors house foreclosed. The streets are packed with for sale signs. She thinks we can list at 185K. We have made some improvements (tile floor in the kitchen and new appliances), but I guess we won't know until it's time.

On the flip side, will we be able to get a mortgage? I've talked to two physician loan companies (including BoA) who assure me that their physician loan products are still available and are profitable and not likely to go away. Also, is my dh's credit going to be damaged? Are credit cards going to lower his available credit?

We've paid our mortgage on time every month, sometimes with great sacrifice to do so, knowing how important it was to make that payment. When we were approved for our loan it was for 100% financing, no PMI. DH was making 40K at that time, and I had no income to speak of. Our mortgage payment was WAY over 28%, and we didn't take the 225K we were offered, we bought a house for 60K less than that! We have a 7-year ARM. We luckily bought with enough forsight to go for the 7 year instead of the 5 incase we had trouble selling the house. I hope it doesn't come to that.

I have been thinking about this a lot lately and stressing over it to say the least. I hate all this unknown stuff. I remember it being hard 5 years ago applying for residency, and the same is true now! Throw the ecomomic factors is, and I am having far too much heartburn.

[diggitydot]

Re: 1 in 6 homeowners are upside down now...

I'm so glad we bought when we did. (4 months ago.) We got a steal on the house, a freakishly low interest rate, and no mortgage insurance. Totally love our mortgage guy, too. Compass Bank rocks.

I am, however, worried sick for my mom. She just retired 2 months ago and has been trying to sell her house. My sister and BIL are building a new home with an apartment for mom so she can retire comfortably and not worry about money. We're now looking into renting out mom's house as soon as sis's house is built so she can at least get some income out of it.

Blech.

[ladymoreta]

Re: 1 in 6 homeowners are upside down now...

On the flip side, will we be able to get a mortgage? I've talked to two physician loan companies (including BoA) who assure me that their physician loan products are still available and are profitable and not likely to go away. Also, is my dh's credit going to be damaged? Are credit cards going to lower his available credit?

You probably won't have trouble if you have good credit, but they'll probably require a down payment. For now, at least, it sounds like this is only causing problems for people with bad or mediocre credit. Selling a house shouldn't hurt your credit, unless you default. Credit cards are a little trickier. They look at how many you have, so that could bring down your score, but they also look at the available credit you have, so several cards with low balances can end up being better than one with a high balance. And it takes a few years for the account to be removed from your credit history after you close it. A long history of having the same card can help, but most of us aren't old enough to meet that (I forget how long it is, but I think it's something like 15 or 20 years).

When we were buying our house, we signed up for BoA's Privacy Assist to check our credit. It tells you what exactly improves or hurts your score from your credit report, and it has a tool that you can play around with to see what would help the most. For example, you could have it estimate your credit score if you paid off a card and left the account open, vs. paying it off and closing the account. And if you have a good explanation for any late payments, you can sometimes get those removed by calling the credit company.

Re: 1 in 6 homeowners are upside down now...

We just had our house reappraised before all this mess and had over $100K in equity. I'm sure it is all gone now. DH has a coworker who took out an $80K home equity loan and got a call from the bank this week to say they re-assessed the house and now want the money back. I am dumb-struck that they can do this. I thought it only affected new loans. :huh:

[Cumberland]

Re: 1 in 6 homeowners are upside down now...

We sold our house in June and I think about it every day- how incredibly fortunate we were to be able to sell it. We bought towards the top of our price range and had a 3yr ARM, both a big risk- it was a large old fixer upper that we remodeled. About a year after we bought it, it appraised for 210K more than we paid for it. We planned to pay off a good portion of DH's student loans and have a sizable chunk for the next house when we moved.

Bc we bought it at a fairly low price given its condition, we were able to sell it for 50K less than the going rate in the neighborhood but we ended up making only slightly more than breaking even. It is hard to imagine that we kissed about 200K goodbye with the market downturn but on the other hand, if it hadnt sold, it would have been truly disastrous for us. I do think about what might have been but am more grateful just to be out from under it.

But, now we are back at zero pretty much- no downpayment for a house and probably couldnt come up with one for a long time. It reminds of that Jimmy Buffet song-' i made enough money to buy miami but i pissed it away so fast'. We werent the ones that pissed it away but it is still gone.

Re: 1 in 6 homeowners are upside down now...

I've been thinking a lot about MIL's house that we sold in Wisconsin. It gave me serious heartburn to sell at a loss almost two years ago but I can't imagine what it would be like now. Her old house doesn't zillow so I'm going to look at the real estate listings. She had a lot of equity in the house, almost 2/3 of what we sold it for, and now we are using that for part of her care. I didn't realize how fortunate we would be to sell then.

[DCJenn]

Re: 1 in 6 homeowners are upside down now...

Luckily, San Antonio is a stable market (for now) although AT&T just moved their headquarters to Dallas so there is a flood of homes over 500k on the market now. (not a problem for me...)

The DC house we are not upside down on, but our tax assessment dropped the taxable value 75k from last year to this (which is great for us) and we're still going to break even when/if it sells this go 'round.

BUT, we have friends in Northwest DC in a 'desirable' neighborhood who couldn't get what they want for their house if they attempted to sell. They thought they could get 900k for it and they'll be LUCKY to get 650k for it. (remember, DC housing values are insane. Even after the correction- our house is 1800 sq. feet and we a paid $389 for it. This house is 3600 sq. ft. (3400? 3200? I don't remember) and we only paid 415k for it.)

As of November first we have no renter in the DC house- and therefore, we have NO extra cash. None. Zero.

The realtors went over last night to look at it and to give me an honest assessment about selling it now or waiting. We have a 5/1 ARM that adjusts in July. Obviously, we'll have to refinance- we're screwed in any case. Closing costs and cash outlay now, or closing costs and cash outlay later.

The bigger question is the mortgage market in DC and I need to hear back from the Realtors about that.

UGH-

Jenn

(ps- the entire reason why we bought in DC was because we couldn't find a house for rent that allowed 50 pound dogs. Think about that those of you in training...)

Re: 1 in 6 homeowners are upside down now...

The 50 lb. dog thing is a limiting factor when looking for housing! And we have three of them (dogs).

I'm extremely grateful not to own a home right now. We sold our house in June for $300 less than we needed to cover all associated costs (we had no equity). We were pretty happy about it, especially since we closed on the day we needed to move!

But I worry about the house we're renting now. It's owned by a physician. He and his family moved closer to town for a few years, and I assume they're renting in town. Our rent on this house can't possibly be enough to cover their monthly payments. So they're probably paying rent plus the remaining monthly pmt on this home. And frankly, I don't think they'll want to move back into this house. We were planning to do one-year rental agreements at a time for the three years that we're here for fellowship, but now I'm wondering if the house will even be available to us next year, or if they'll put it on the market.

There is no way we're finding another rental home this nice for this cheap - and remember those three 50 lb. dogs!