Facebook's IPO Debacle, Day 3: Un-Friended and Dis-Liked on Wall…
Former Olympic Rower Turned to Minimalism to Pay Down $82,000 in Debt
As home prices continue to weaken, more and more homeowners are facing the real possibility that their homes will wind up "underwater" before the market starts to rebound. Of all the areas in the country that are facing tough times, the worst of times are being felt in the California city of Mountain House.So what exactly does it mean to have your house underwater? Simply put, a mortgage goes underwater when the balance a homeowner owes on his house is more than the house is worth.
Just how bad has the situation gotten in Mountain House? The figures are staggering. According to figures released yesterday, roughly 90% of all homeowners in Mountain House are now facing mortgages that are underwater. Nine out of every 10 homeowners woke up this morning facing the fact that their home values have been in free fall and there is little that they can do to correct the current situation.
And the amount of which these homes have fallen is nothing short of remarkable. According to yesterday's report, the average homeowner in the city is now looking at their home value being priced at a stunning $122,000 under what they owe on their mortgages.
While the situation is Mountain House is definitely more extreme than the situation on a nation wide basis, it still offers clues as to just how bad things could get, and the impact that such a drop in home values can have on the overall economic picture.
As more and more homeowners across the nation fall into the same situation as homeowners in Mountain House, consumer spending will continue to shrink. Homeowners in Mountain House are already starting to realize that they have to tighten their belts and pull back on any sort of extra spending.
According to the real estate data company First American CoreLogic, across the nation there are currently 7.6 million properties that have fallen underwater, and there are another 2.1 million homes that are in grave danger of reaching the same status if something does not change, and change soon.
Unfortunately, the impact is going to be felt by all Americans, not just those who find themselves in the dreaded situation of being underwater on their mortgages. Businesses in Mountain House are feeling the pain, and many have already been forced to close their doors as consumers cut back on their spending. This is something that could unfortunately become true all across the nation.
The housing market has created a tough situation for the nation. As the economy has weakened, home sales and home prices have dropped. As home prices continue to drop, consumer spending is going to continue to drop. While the national economy is in dire need of an increase in spending to put the economy back on track, it just does not seem likely that this is going to occur as long as homeowners have to deal with concerns over being able to stay in their houses.
One thing is for sure, as President-elect Obama enters into his first term next year, the housing market is definitely going to be on the top of his agenda. Let's hope things turn, and turn fast, because the fate of the economy could definitely be riding on the future of the struggling housing market.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
Reader Comments (Page 2 of 2)
11-12-2008 @ 7:27PM
menda said...
I live by Mtn House. My house was out here long before they built those homes. Those people moved in from the bay area and WAY OVERPAID for those places, and they all just HAD to get in so BADLY they didn't care they couldn't afford them! It was "all the rage" of a "new community". Stupid people! Nevermind that a majority of the homes have 3-4 generations of ppl in them, most foreigners that collect from the system anyway. So, they'll get out of it!
11-12-2008 @ 7:49PM
fathertimema said...
I have to laugh at these so call tough times for business. Just have to get into the right racket and you have it made. Even thru rough times.
I started a residental window cleaning business 20 years ago. No matter how tight times gets the business always did well. Even today business is very good.
If you want to do well being self employed start a business that women need. Women will always find the $$$ to get what they want. Women just love getting their nails, hair, done and of course the windows clean to.
The reasoning process of a woman is so screwed up but us men have known that for years. LOL
11-12-2008 @ 8:11PM
halhobbs said...
What Japan did years ago was to write mortgages for 90 years, making
the monthly payments doable. It's just that it would take three or
four generations to pay the loans off and that didn't work in Japan.
What would happen in California is that after refinancing them for 50
years or some such, when the values go back up they would refinance
them at regular length mortgages. Meanwhile the mortgage holders
would stay solvent and the homeowners would be able to afford their
monthly payments. I would not have to help them with their payments
11-12-2008 @ 8:45PM
Arthur said...
The California housing market has ..been on a false rise for more than ten years. I have a nephew who is an ecological engineer and his wife who was an executive with a marketing company. Prior to leaving the San Francisco area and moved to Maine, he working for an engineering firm and she for L.L. Bean as a Marketing Executive. Their combined salaries were about fifteen percent less than in California but they bought a home more than 3000 Sq. Ft. and the payment including principal, interest, taxes and insurance are almost half of the rent they were paying for a two bedroom 1350 Sq. Ft. house. A simple matter of mathmatics, common sense and a lack of ego. California will fall wether it be to the ocean or financial markets ! In any event it will fall and as for the balance of this country, greed, ego, and lies are what has brought down this house of cards !
12-21-2008 @ 11:47AM
Bobby said...
A few of you actually have it right on here.
A very large part of our national housing failure has been due to metro areas in particular having appreciative values tied to personal levels of corruption. I can't find a better word to describe the approach of a dwelling rising in value with no respect to hard cost associated with the building of it. The corruption lies in the hands of builders, land developers, *appraisers*, realtors, lenders & rating agencies. There should be a local & national association set up to monitor appreciative trends in real estate in respect to geographical costs & reasonable increases based on older standards in line with LONG TERM OWNERSHIP! This is why 30-40 yr mortgages were established to finance owning a home. Reasonable standard of appreciation used to be 3-5% annually. All of a sudden in the past ten yrs. I saw that trend jump to an unfathomable 25% annual increase in hot spot metro areas across the nation. Greed turned respectable & reasonable return on investment & the American dream into a game of musical chairs of which we now see many have been left standing with these "underwater" home evaluations. Our leadership has lost touch with common sense approach to guarding the real wealth of this country.... It's such an easy issue to resolve,, MONITOR GREED!! It's the Manhattan diabolical mindset that has swept our country! Not everyone can be rich & those who are are supposed to earn it! Now everyone please go watch a gameshow of your choice giving away a million bucks,, television is busting at the seams with them,, the scourge of real productivity...
11-12-2008 @ 10:55PM
Phil said...
Come on...it isn't housing prices...it is the borrowing on equity...refinanced homes that have maxed out equity and now lost equity...that is getting everyone into trouble. That means they borrowed money against their house for OTHER things, assuming they could sell their house for a profit later, and now it is time to pay the piper!