Is The Current Economic Meltdown Affecting The Prices Of All Mortgages In America, Or Just The Bad Mortgages?
In other words, are the values of just the faulty sub-prime mortgages being affected, or are the values of all American mortgages affected?
Tags: Current, Economic, Meltdown, Mortgages, Prices
The meltdown is way past subprime mortgages. People who could really only afford $200K fixed rate mortgages, bought $500K homes on adjustable rate interest only mortgages. Interest rates went up and now those homes are being foreclosed.
Also, housing prices were inflated in many markets. Therefore, home values have dropped causing many people to owe much more than the current value of their homes.
There is now a glut of homes for sale and a lot fewer people who can qualify for a mortgage. Money for lending is tight and so are the requirements to qualify.
The average house is worth half what it was 3 years ago, regardless of what kind of mortgage is against it.
Mortgages are actually much more reasonable now because people who could never afford to buy at the previous level can now buy a house for less than what rent is costing them per month.
The issue isn’t actually about mortgages but rather about the extension of credit to those people who ultimately couldn’t afford those mortgages in the face of falling home prices, whether they were sub prime (most were) and more credit worthy mortgages. At one time, sub-prime mortgages fell under the umbrella of ‘creative financing.’ In actuality and as we know now, it was all smoke and mirrors as home prices have drastically fallen over the past several years.
Last Friday I heard on the radio that 1 in 6 homeowners (17%) is now ‘upside down’ in their homes meaning they owe more on their mortgages than their homes are worth. While being upside with an auto loan is common, the term has never been so widely applied to mortgages until now.
So yes, anyone with a sub-prime loan is probably upside down and those who bought a home in the last couple of years and have a more standard conventional fixed rate loan mortgage are probably upside down.
Since the entire meltdown was fueled by greed by lenders and ignorance on the part of many buyers, lending institutions will now be making loans only to those people who can actually afford the homes in question. Credit card companies are also reducing the amount of available credit to all but its most credit worthy customers.
In short form and better explained than I can do it, here are the 10 steps to the meltdown we are currently experiencing:http://www.time.com/time/specials/packag…
Yes it is affecting everything here in Australia too. A lot of people are loosing their homes, and share prices and the value of the Australian dollar has really gone down in the past few months, but especially last week.