[TheCommuter]

http://online.barrons.com/article/SB...lenews_barrons

My former city of residence is located in Central California. The home values have plunged by over 40 percent, many people are left owing more on their homes than they are now worth, and the foreclosure rate is among the worst in the nation.

I'm assured that these real estate woes are going to be an uphill challenge for the next US President. Although other real estate slumps have gone into recovery, I suspect this recovery will be long and painful.

[CHATSDALE]

there are certain areas where the housing market is really rough...the las vegas, florida, southern calif areas are particularly hard hit
some of these people can relocate but for those who can't or choose not to the rental rates have not gone down as the prices of houses have bottomed out so they are going to be in a bad bind

[TheCommuter]

The people who bought houses in these "bubble areas" during the peak years (2004 through 2006) absolutely cannot relocate unless they completely walk away from their homes via foreclosure or short sale.

For example, I sold my California house in 2005 to a man who got 100 percent financing, a zero down payment, and a piggyback loan. He paid $260,000 for the house 3 years ago. Today, that very same property is worth $140,000. In other words, the guy who bought my previous house now owes $100,000 more than the property is actually worth.

He is badly upside down in his home loan. His only hopes for escaping this situation are foreclosure, short sale, or continuing to make the payments on this upside-down loan with the hope that the house will again increase in value.

Approximately 10 million homeowners who have properties in "bubble areas" are now upside-down in their home loans, owing far more on their mortgages than these houses are worth in the current real estate market.

[Roy Fokker]

Originally Posted by TheCommuter

I'm assured that these real estate woes are going to be an uphill challenge for the next US President.

I didn't realize that real estate - be it boom or bust - was under the purview of the President.* May be it's related to Article II, Section 8 of the US Constitution.


cheers,

* : Or "government" for that matter - but that's a whole different day and a whole different thread.

[HM2Viking]

The choices that government makes affects how the banking system is regulated.

Do we bail out Freddy Mac/FNMA?

Or do we help individual home owners refinance their loans so they stay in their homes?

Their is a positive social good to maintaining social stability within neighborhoods.

Strong social institutions provide the framework within which capitalism can survive and thrive.

[CHATSDALE]

communter, the man who bought your house if he is on a fixed rate then he would be wise to ride out the crisis, he has the same house and it is serving his purpose so if he can continue to make payments then when the turn around comes, he will be more comfortable..
his losses are on paper, it is still the same house as when he first bougth it, the turnover is not going to be what he wanted but the key is not to panic and at some point in time he will not be in an upside down situation

[herring_RN]

Originally Posted by CHATSDALE

communter, the man who bought your house if he is on a fixed rate then he would be wise to ride out the crisis, he has the same house and it is serving his purpose so if he can continue to make payments then when the turn around comes, he will be more comfortable..
his losses are on paper, it is still the same house as when he first bougth it, the turnover is not going to be what he wanted but the key is not to panic and at some point in time he will not be in an upside down situation

I think the same about our house.
On paper we "lost" a few hundred thousand but we still live in the same house.

[♪♫ in my ♥]

As I see it, part of the problem was a fundamental shift from viewing one's house primarily as a domicile and a hedge against inflation to viewing it as an investment.

[HM2Viking]

That and encouraging Americans to "trade up" in their housing every few years.

[llg]

... and allowing people to buy houses with no downpayment, interest-only loans, etc. All that "creative financing" allowed people to buy houses they couldn't afford.

Their only hope was that prices would continue to rise. If prices fell, they were sunk.

Prices fell -- and those people have not only hurt themselves, they have brought their neighbors down with them.