There is no way the housing market will stabilize anytime soon when 20% of all homes are worth less than their mortgages. The only real hope these homeowners have is if inflation takes off in the coming years and it will, driving housing prices higher. Remember that deflation magnifys debt while inflation minimizes it. The Fed is flooding the country with liquidity trying to inflate away the nation's debts. While it will probably work, the problems inflation creates will bring it's own pain.-Lou
House-Price Drops Leave More Underwater
The downturn in home prices has left about 20% of U.S. homeowners owing more on a mortgage than their homes are worth, according to one new study, signaling additional challenges to the Obama administration's efforts to stabilize the housing market.
The increase in the number of such "underwater" borrowers comes amid signs that falling prices are making homes more affordable for first-time buyers and others who have been shut out of the housing market. But falling prices also make it more difficult for homeowners who get into financial trouble to refinance or sell their homes, and for others to take advantage of lower interest rates.
For instance, fewer will qualify to take advantage of a key component of the Obama administration's plan to stabilize the housing market. Under the plan, announced in February, as many as five million homeowners whose loans are owned or guaranteed by government-controlled mortgage giants Fannie Mae and Freddie Mac can refinance their mortgages, but only if the mortgage loan is a maximum of 105% of the home's value.
Government officials are considering an increase in that limit. "It's a question that we're looking at," said James Lockhart, director of the Federal Housing Finance Agency, which regulates Fannie and Freddie.
Real-estate Web site Zillow.com said that overall, the number of borrowers who are underwater climbed to 20.4 million at the end of the first quarter from 16.3 million at the end of the fourth quarter. The latest figure represents 21.9% of all homeowners, according to Zillow, up from 17.6% in the fourth quarter and 14.3% in the third quarter.
Read More:
Posts
No comments:
Post a Comment