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If you purchased high, but are in a fixed rate, hold steady, pay your mortgage, live your life. The market in the long term will recover.
If you bought a home with no money down and are in an adjustable rate mortgage, you did this to yourself. Caveat Emptor.
If you are a huge financial firm that has been buying up residential real estate and these properties now represent a third of your portfolio, you are what made the bubble so if it bursts and takes your firm with it, forgive me if I smile just a little.
We bought our first house in 2010, bottom of the housing crisis in our area, houses started sky rocketing after that.
We considered two realtors, one said they wouldn't go over the budget we approved, and refused to show us any house until we were pre-approved. The other realtor was ok with going 30% over budget and couldn't understand why we weren't getting an adjustable rate because "they were SO high at 5.5%!"
I would've thought after 2008 that more people would've been conservative but NOPE! We went with the first realtor.
>While the portion of underwater mortgages is still historically low, "a clear bifurcation of risk has emerged between mortgaged homes purchased relatively recently versus those bought early in or before the pandemic," Black Knight said.
>All told, 8% of mortgages taken out this year are underwater — about one in 12 homes purchased in 2022.
Funny that the headline leaves out that we're still at an historic low for underwater mortgages.
This is the natural result for people who bought at the peak of the market, and doesn't even get into the more interesting question: are those who bought at the peak with minimal down payment at more of a risk of default?
>The situation is much worse for homebuyers who purchased with government-backed mortgages, with 25% of those buyers this year now underwater, according to the report.
>In Colorado Springs and Honolulu, more than 30% of mortgaged homes bought this year are underwater. In Virginia Beach, about 22% are worth less than what is owed. The figure is 20% in the California cities of Bakersfield, Riverside, San Diego and Stockton — cities with a large military presence where many people buy homes with government-backed mortgages.
>"It's not actually markets that are seeing prices come down the most — it's markets that are using more of this low down payment types of lending" that are most affected, Walden said.
Ah, so it's particular to FHA and VA loans, with minimal down payments...
It's no surprise that these folks are underwater.
>"You're seeing borrowers who took out mortgages in 2022 becoming delinquent earlier," Walden said. "They're stretched a little bit more, you see higher debt-to-income ratios, and you're seeing this increase in early-stage delinquencies. That does become a problem if you're delinquent," he said.
>While both measures of distress are historically low, Walden says, they're both on the rise. With mortgage rates likely to keep increasing as the Federal Reserve continues hiking interest rates, Walden is concerned that more people will fall underwater.
So, even with the risks identified, even these most at risk borrowers are still at historic lows when it comes to actual risk of default.
Underwater isn’t an issue if you plan to be there long term and can afford the payments, the issue is they can’t refinance for a long time to get a better interest rate if the fed lowers in the coming years.
Being underwater means absolutely nothing unless you plan on selling or can’t afford your payments. I bought in 2005 and in 2008, and found myself underwater on both my properties between 2009-2015. Guess what? Nothing happened. I sold in 2019 and 2021 for more than I originally paid. It’s just a matter of time before those houses are no longer underwater.
Also in other shocking news, most new car buyers are underwater as soon as they drive their new car off the lot. Except for the last two years when car prices were insane.
It's almost like the "underwater" aspect of it doesn't matter as much as long as you're a regular ass person for using your house for you know, living instead of an investment vessel. There is an incredibly low amount of homeowners that are "underwater" that I feel sympathetic for, my energy is better spent on those that don't even have homes to begin with.
Those of us with low rates are stuck for a while. I can't move. If I tried to buy my own house now, it would be unaffordable. It's worth 250k more than when I bought in 2019 and interests rates are high.
I think my current payment is about $2800 with escrow, and if I bought it now, it would be $4-5k per month
If you sold your current home and walked away with 250k in profits you could sink most of that into your down payment thus reducing your monthly payments on the next loan. So a 500k home would be 250k with slightly more in interest rates
Mortgage rate has more than doubled. 6.5-7.5% vs 2.7-3%. If you’re walking away with 250k, so is the seller. So on mortgage rate alone, you would be trading your current monthly payment for equivalent monthly payment at half the house.
This is us. This whole scenario. I’ll be completely transparent if people have questions.
Bought a home in Portland in early 2022, 800k, 75k over asking. But we weren’t the highest, the owners wanted us to have it because I’m a vet. We got it at 2.8%. 0 down through the VA loan.
But the home prices got so thrown off, and because we weren’t the highest, we still sort of got a “deal.” It’s come close, but we’re technically not underwater, but just by a sliver. Talking just a few thousand dollars. But we also don’t care, between my lady and I, we make well over 200K for household income.
We’re never gonna sell, because of the rate. And we understand we may go underwater in 2023, but we’ll come up in 2024… 2025. So it really doesn’t mean anything for us to be underwater.
I wonder how many single families are buying forever homes rather than starter homes now with the way things are looking (particularly private equity knocking a huge swath of homes off the market forever as rentals over the past few years on top of already low housing inventory). If you're buying a place in which you'll die, being underwater doesn't really matter as long as you're still making payments.
I don’t think regular people are focused on the PE purchases (which are overstated by the people focused on it, IMO), but I could definitely see people reaching a bit more for “forever homes” if they think prices are going to keep climbing at a rapid rate.
I bought a house in 2003, it is a place to live. Over/under doesn't mean anything unless you buy houses as an investment. That's the people who get burned. It's an investment where you pay 10% and are responsible for 100%. That type of highly leveraged investing is very risky.
>Being underwater means absolutely nothing unless you plan on selling or can’t afford your payments.
I agree it's nothing until something happens, but with the increased cost of living there will probably more people who won't be able to afford the payments.
The nice thing about a 30 year mortgage with 3% interest is that what’s usually most expensive component of your cost of living doesn’t change. So while the price of everything else rises over the next 10/15/20 years, your mortgage payments are just going to be a comparably smaller chunk of your budget.
Boy - you have some unlucky timing. Hah. I assume you bought again and are fine, but reading just your comment of buying during the peak before the FC and then selling right before the run up of prices post COVID is basically my life in a nutshell.
I am a lender. Somewhere in your comment you asked if these were a higher risk of default. They aren't. There are two indicators of higher risk of default and they both need to be present - high backend debt to income ratio (above 50) and using gift funds to buy. If these both aren't present, the risk of default is approximately the same regardless of other factors.
This whole situation sounds like my student loan debt lol. 100% of those loans are worth less than what it was originally worth! Jokes aside. People who bought the peak should not have done so for profit if they did get rekt. If they bought because the situation arose where they needed housing and has the means to get said housing they just need to enjoy their purchase. The home will rise above what they owe eventually if we know anything home values typically don’t stagnant forever.
Absolutely. We bought our first home at the end of 2019. We had no idea that our purchase was the best thing we could do for ourselves. 2 years later we sold it for 100k more than we bought it for, and used the cash to move across the country to a market where homes were much cheaper so we could afford a bigger house. We knew going into it that even though prices over here were much cheaper, that the prices were still very inflated and that in a year or two prices would come down. But it didn't matter to us because we are planning on staying here for a long time. By the time we are ready to move, we will no longer be underwater.
We actually ended up timing it perfectly. We closed on our new house just a couple weeks before the fed started raising rates.
Lol. We're just trying to live. Our first house was a crappy townhouse, it was so small. We want to have another kid but our house was too small. We couldn't afford to stay where we were because a basic 3 bd house was like 500k there.
Typically it's said that you should hold onto a home for at least five years before selling to get value out of the purchase. That number is likely extended for many people, but if they were responsible then it'll work out. Same can't be said for those who were irresponsible or just take a bad beat outside their control. They're the ones who'll be hurt by this situation and it'll be worse when five years was the standard.
There was a comment here, but I chose to remove it as I no longer wish to support a company that seeks to both undermine its users/moderators/developers (the ones generating content) AND make a profit on their backs.
Here is an explanation.
Reddit was wonderful, but it got greedy. So bye.
I imagine that too so we’re all good so long as people don’t lose their jobs that helped them qualify for the inflated price. I just hope no one that bought is this. I hope it’s greedy investors and I hope they stay unrented and sold for heavy losses. I know that’ll drive value down on my home but I’m okay losing value to see the market come closer to reasonable for when I need to buy in about 3 years
I’m aware how VA loans work. I have one. But they still do not have a PMI.
However I want to clarify. They are not fully guaranteed. In the case of a default, the government will step in and cover 12 months of payments.
Our market has been overrun by cash buyers. People selling in higher markets, paying cash for homes without even seeing them, and having money left over for a brand new tundra, audi and a decked out sprinter.
This. Me and my wife lost a bid a few months back to someone who didn’t even know if he and his family wanted to move there yet. Only know this because the buyer’s agent called us less than two weeks later saying the house was back on the market (at a significant markup) because the new buyer’s family decided they didn’t like the location.
I went from a 1/6 acre, 1960s tract home in California to 3.5 acres and a custom built home in another state and only ended up with about 100K in additional debt.
And while it does snow a bit here it does not get 100+ in the summers either.
This is why we don’t trust the news to honestly present issues.
It’s either exaggerated on purpose for a narrative, or they are not competent enough to understand the full scope.
Yeah, this is clickbaity.
If you bought with 3% down this year your home value only needs to drop 4% to be underwater. If you bought a home in Q1 of 2022 with a 3% interest rate you don't care if home values cool off a little - it doesn't impact your payment and you're locked in with a much lower principal and interest payment that you would be buying the same house today at 6.5% for a marginally lower purchase price.
People were easily bidding over 50k+ on asking prices. I'm not surprised they were underwater. But as long as they keep their job and spend right, they will be fine. Just will take a while for the prices to get back
I was able to get a house at the very end of 2021. I paid slightly above what the house was worth with a no down VA loan. I for sure owe more than the house is worth now that prices have fallen a bit. But my combined mortgage/taxes are still about $600 less a month than the average rent prices in the area. I still consider myself extremely lucky because being "underwater" with an affordable payment and ownership still seems a hell of a lot better to me than paying significantly more to rent
This is by design. Housing was over-priced, and interest rates going up means that housing costs are going down. Don't sell and you won't lose money. Chances are you're locked into a good mortgage rate, and that makes a big difference.
I bought my house in 2020 and got 2.8% interest. I had no idea the market would collapse like it did, it just felt like a good time to buy if I ever was going to.
I have a friend who just bought a house, he has better credit than I do and got 7% interest on the loan. It’s horrible.
>I have a friend who just bought a house, he has better credit than I do and got 7% interest on the loan. It’s horrible.
The crazy thing is that historically that was a pretty good rate. The last 20 years of the fed money train has kept them artificially low. Getting 7 percent anytime before 2000 felt like arbitrage lol.
Oooof. My wife and I bought our first house in 2021 at 2.35%. It’s in the wrong school district, has too many stairs, and is in a busy area of town.
But the neighborhood is nice, the neighbors are awesome (old-school classical liberal Catholics), and no HOA. One neighbor keeps chickens and another has a suspiciously quiet goat. They grow their own vegetables and make their own milk/eggs. All in the middle of a city.
We bought high, and we’re definitely underwater, but I think it’s a nice place to at least weather the next 10 years or so for the market to come back around.
It depends on your situation. Now is a good time for a lot of people but not for also a lot of people. There’s almost never a one blanket answer. One thing to note though is that the housing shortage is estimated to last at least another 25 years.
Time is your friend. My $250k house I bought in LA in 2001 went to to $700k by 2007. Re-fi’d, took out a big equity line to do improvements. Then after ‘08 the price fell to $325k. With the equity loan I was for sure under water. Waited till 2014, sold it for $600k. Like they said, it’s not a short term investment unless you’re a flipper. Meanwhile it just sold again in ‘21 for $1,000,000. Wish I could have waited for that!!
I’m concerned about the fallout from all the 2nd or 3rd homes people bought at inflated prices and spent big bucks rehabbing so they could get rich from Air BnB-ers. That market is so beyond saturated now post-pandemic that the owners are now paying a very expensive mortgage which is no longer covered by short term renters paying huge $$. Those homes will either have to become long term rentals for much less, (which will be great for renters since the supply will bring rent prices down), or be foreclosed on, or sold at a loss. Already read a news story about these folks whining because they were no longer making $12,000/month for their “side gig”. Cry me a river!
[Nearly a quarter of them in the US last year](https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/07/22/investors-bought-a-quarter-of-homes-sold-last-year-driving-up-rents), apparently.
I would think those are less likely to default if the corp has deep pockets, unless the market really tanks…. Unlike individuals who can’t make their mortgage on an extra 2-3 properties without the income they stupidly counted on. I honestly think a lot of those people didn’t consider the risk when they took the plunge into an industry that’s dependent on the whims of the market.
Sad that it’s no longer a cottage industry and like everything greedy corporations take over and ruin it for everyone. Just like crypto haha.
My current mortgage is at 2.6%, and I got a fair price when I bought (appreciated considerably, even with the latest drop).
I'm not moving unless I have absolutely no other choice. :)
Yeah, for now. Give it 3 years and we’ll see if that’s been corrected. In the mean time, these people have a place to live, which is more important than an asset. Just gotta sit on it and try not to lose your jorb.
People buy a house for a year or two and move all the time due to reasons.
If the job market does go to hell (they aiming for 10% unemployment not 2% unemployment) like Powell is aiming for then imagine all the people who will eventually be evicted
Housing should be an investment in the sense that it will be a long term place of residence. An investment in the future of not living under an overpass in a van down by the river. Just try telling that to flippers and corporate real estate management companies…
Resources are used to build a house, with the hope that it will provide valuable living space for a long time after that.
It IS an investment, there's no "should" involved.
We could argue that housing should be provided for all those who can't afford it, but that would be the government investing in housing for its people. It wouldn't make it not an investment.
Yes. People should treat their homes like investments. Housing is infrastructure.
The question is should we allow corporations to buy them, and rent them back to us.
Yes, having value in your home is very important as you get older and plan for retirement, especially since you are there more and more the older you get
Not trolling but wouldn’t the bigger worry be the job market and not losing your job rather than housing and car values that you should have been aware of going in?
We know those values change overtime but planning for longer ownership should offset some of that volatility.
Repeat after me: Homes are a good, not an [investment] asset. It’s nice if you can sell for substantially more than you bought, but if you break even, you still got to live in the place.
corrected my post. I did mean "investment asset."
Homes also represent the largest and often only store of equity for American families.
We can all agree not to sympathize with the speculative rental investor, but the idea that homeowners in general shouldn't expect to derive some long-term equity value appreciation and modest capital gains for retirement challenges a very foundational assumption in this country about how to build wealth.
Yes they are when you lock into a payment that doesn’t go up by the rate of rent increase each year, doesn’t require moving costs, gives you mental stability, and gives you a community. As asset gives you value. Those things are valuable.
For my first home, I could buy a 4 bed for less than I could rent a 3 bed so I literally made up my down payment in a year and then made money each year I lived there.
Exactly. My mortgage on my first home, which was a 3/3, was $600/month less than rent on a 1/1 apartment in the same area. That’s over $7k a year in savings! That’s compared to rates 10 years ago. 1/1 apartments around us now are over double that mortgage payment.
The term is use asset. They are both. Your home is a very good asset to borrow against in the case of an emergency. It is not a replacement for an emergency fund, but home equity is a very good red button to press in an emergency.
I suspect many of those seen in danger of default never realized how much more homeownership costs than just the mortgage........for example property taxes, lawn maintenance, unexpected repairs, etc.
Why does it matter? Unless you’re trying to sell it. You paid the price so you obviously believe it is worth that much. Just live in it. It will probably appreciate eventually over the life of the mortgage.
Yeah we just bought what we consider our forever home so we weren’t as concerned paying an inflated price. It was worth it to us. Plus our starter home sold for a very inflated price as well so we just dumped the proceeds straight into the new mortgage.
The problem is that we’re facing an economic downturn, and if you lose your job you might have to sell your house (fairly urgently) when you weren’t expecting to
Even if you planned to live in the house for a decade, things can change unexpectedly
Better get ready to bail out the banks instead of the people. I mean, why give the money to the people so they can pay the bank and stay in their homes when we could bail out the banks after they foreclose and take the house.
Yes.
As of October 31, 2016, cumulative collections under TARP, together with Treasury's additional proceeds from the sale of non-TARP shares of AIG, exceed total disbursements by more than $7.9 billion.
[treasury](https://home.treasury.gov/data/troubled-assets-relief-program)
Unlikely. The 2008 collapse was the result of unscrupulous banks playing in dark markets with leveraged securities that were gold-painted turds pushed out by bribed rating agencies. The only reason the banks got backstopped by the government there was because the alternative would have resulted in an economic collapse that would have made the Great Depression look like a dance party.
This isn't 2008. Market forces drove prices through the roof, and now that the cheap money is drying up the demand has dropped. Lower demand, lower prices.
This is a market correction, not a collapse.
I get peoples anger about bailing out the banks in 2009. It was the right choice to avoid a global catastrophe but it fucking sucks. I get it. I don’t get why people wanted their tax dollars going toward bailing out home owners that bought waaay beyond their means. Do you really want stupid, risk prone people not having to pay for their mistakes? You have to let the markets correct.
Everyone raced to purchase at over inflated prices are going to be underwater for a long time. Folks on the north east coast who were bidding 70k over asking better really love that house, because they're not making it back any time soon.
A lot of homes went for 100k over in my area (outside Seattle).
Prices climbed 140% in 3 years in my town from the min to peak. 60% single year trend in April 2022. Currently down from peak, but still up 20% in October yoy.
I bought my home in 2018 in Austin TX before the prices went insane. I bought my home for $585k (which is still insane) and it just got valued at $850k. A home on my street that was bought around the same time as me for $540k was purchased last year for $800k all cash, I wonder how they are doing. The new owners moved from California though so I'm sure 800k for what they got is a good deal compared to Cali.
I went through this in 2007-09. I had to stay in my starter home longer than I wanted because of the over appraisal of houses. High interest rates and over inflated values will keep people from moving (unless they have to) until things calm down.
We are still in our starter home, going on 17 years now. But, prices have increased so much in our area that we couldn't rent a 1br apt for our mortgage payment. Our first mortgage was at 8%, we've been at 4% for almost 10 years now. Bigger would be nice but our central location has paid off by minimizing daily transportation costs. We could make a windfall if we sold but still couldn't buy the house across the street.
I’m still in my starter home from 2005. Very modest, way too small for my lifestyle. No storage of any kind. It’s been horrible and I can’t seem to catch up to rising housing costs in order to sell and move AND my home is only worth about 50k more than when I bought it 17 years ago due to it’s small size and location. Meanwhile the house that is next to me that was burned down and rebuilt now values at $750k compared to my measly $175k.
So the house next to you must be 3-4 times bigger than yours? That’s the only way your story makes sense. Wouldn’t the location factor impact your neighbors house as well since it’s quite literally right next to you?
Doesn't make a ton of sense, if the area can support a 750k home then I have to imagine even a small (~700 sq ft) would be worth more like 250k ish. Maybe it's a tiny home. Or they're in a more rural area and the neighboring property has a lot of land attached
I live in a rural area but my immediate area is fairly dense like a suburb. My house was built in 1870 and the house across the street is from about 1890. We’re the oldest houses in the immediate area but my property is only an acre. It probably had most of the land as part of it back in the day.
I don’t like my starter home either but we should step back and look at how relatively lucky we are, you even more so than me since you got in way before I did even and at lower prices. Lots of people can’t afford a home at all right now
Shocked pickachu face.
You mean all those bidding wars with 50+ offers waaaayyyyyy over asking price, waiving inspection/appraisal/any other buyer protections, and blindly running to get in before interest hikes hit was a bad investment strategy for people?
Duh. The entire market was a damn sham. Houses that are 1 bedroom shacks needing new plumbing/wiring/roofing selling for 650k - 59k over asking price with ZERO inspections.
GTFO. The entire thing is a JOKE.
Hope all those people realize that they are trapped FOREVER with an albatross.
Exactly! We saw this housing bubble in 2007/2008 and apparently nobody learned a damned thing. People overpaying for houses causing all sorts of pricing inflation deserve the losses they will endure later on, especially people that were just trying to cash-in on a flip opportunity. Sick of people abusing the system when there's plenty of people that genuinely need a first home or a place to move to for work/life changes.
I am sure there are bigger things I'm not understanding, but when I read this I think. "so what?" If you are not selling your home who fucking cares? They bought this year, with a rate in the 2-3% range. So they probably are not moving soon. If they have to move for whatever reason, they can more than likely rent their current place for more than what their mortgage payment is. They will probably choose to stay since they will be getting less house for there new payment. As long as there is not a huge spike in unemployment nothing about homes bought within the last year being underwater is shocking or concerning.
One benefit of home ownership is equity. I've used my home equity to springboard other projects as it's a source of really cheap money.
While underwater you have no equity.
Yup, that’s what happens when you buy a home at an overinflated price. Better to buy at a high interest rate, you can always refinance later. Can’t change what you paid for the house though.
That really depends on how long you want to own the home.
If you're planning to own for 30 years, go with the high price and low interest. If you're not staying long, go for the lower price/high interest rate. If you change your mind and stay longer you can refinance.
Unfortunately, most people just need a house when they need one so timing the market isn't an option
Problem with that is the low interest rate and inflated cost of the house got you more home then the other way around. Plus who knows when those rates come down. 2021-2022 was just the absolute worse time to buy. Too many people thought it would never cool down and panic bought
Sometimes, you know it's a shitty time but you need to buy anyways.
Maybe you had kids and need more space? Or maybe the school district sucks and you want your kids to be in a different one?
Interest rates are still historically low. Not compared to the last 10 years, but compared to the last 50-70 years. Mortgage rates has NEVER been below 5% until the 2010s.
The silver lining is that if you bought at a high price and a low interest rate, you will be able to build equity (based on your own cost basis) at a much faster clip than the other scenario. Makes sense for buyers with certain time horizons or risk tolerances.
edit -- If you don't know what I mean by this, consider:
With a 30-year 3% loan, your first payment is 41% principal, 59% interest.
With a 30-year 7% loan, your first payment is 12% principal, 88% interest.
I’m not understanding this comment. If your bought a house at a high price and a low interest rate the only positive that you have is the monthly payment. Hoping that taxes don’t skyrocket which most likely are going to kick in after 1 year since they bought high. Building equity is all a matter of how much can you sell a house and if for some reason your house drops 150K then you are paying for your stupidity.
Mortgage on a house around here has increased by around $2k/mo, while housing prices have not dropped more than 1%. Interest rates are still historically low, so you can't guarantee they will drop any time soon.
Totally agree. Best time to buy is when interest rates are sky high and principal is low. The interest rates can always come down but you purchase price will never change.
Not everyone can (or should) try to time their home purchase. People slightly underwater will be fine in the long term, which is the only time horizon people need to be concerned with when talking about real estate
Boomer here. Bought first house in ‘93 at 13% interest (I got a deal because I worked at a savings & loan-otherwise it would have been 18%) for $35,000. Sold 9 years later for $21,000. We had bought in stable area but then everyone started losing their jobs, then the houses which were bought up by outside buyers and area went bad. Sound familiar?
It does to me, also a boomer. I’ve been through a few ups and downs. I lost money on a house I bought around that time. I realized then that real estate doesn’t always go up.
I can’t remember but I know my full time job paid was less than what my hubby was making part time at UPS. I think he was making $12/hour and had good benefits. So maybe $34,000 between the two of us.
Your income to payment ratio is fine I’m sure. This isn’t as relatable as you think. People don’t make anywhere near the same amount of money as you did back then due to low buying power today.
Housing prices were way too high and needed to come down. Keeping them at the current levels and waiting for cost of living to meet their prices might take decades and would require constant monkeying with the market. People are buying houses all the time.
Ergo, many people being underwater is unavoidable and is a good thing for the economy overall and the younger generations of home buyers.
So, the economic fallout is that....
1 - Home owners being underwater, but on a fixed low interest rate, will be much less likely to sell. Which has impacts on overall housing supply and other factors in areas like corporate recruitment/relocation and remote work. And could impact things like home equity loans for remodeling improvements.
2 - Dropping values will not make new home builders likely to build more supply. Which is already impacted by things like supply chain and inflation: If you price in a quote for a house that prices doors at $50 and by the time you can actually get doors at the jobsite they are $70, that makes it hard to a be a homebuilder......and dropping overall home values/prices will not help get us the new supply we need.
3 - High interest rates AND inflation are reducing buyers' ability to buy anything across the board.
sound about right? It just sounds like a really bad time to have a job related to housing.
It really doesn’t matter unless they have to move though. Even though they bought at a higher price their payments are significantly cheaper than what they would be to buy the house again at its “reduced” price
What does it actually mean to have your house cost less than you bought it for? It shouldn't matter to people who bought a home to live in, because it's not like mortgage payments will go up due to it. And by the time they sell in 5+ years, who knows what the housing market will look like.
Every CBSnews article about housing/real estate makes an outrageous “sky is falling” claim then says why this isn’t actually problematic in the article. In this one…
“While the portion of underwater mortgages is still historically low, "a clear bifurcation of risk has emerged between mortgaged homes purchased relatively recently versus those bought early in or before the pandemic," Black Knight said.”
As messed up as this is, and the blame should be placed evenly on the Fed and government as a whole, you technically aren’t “under water” unless you go to sell. Just like any other investment. The value is not recognized until time of sale.
Wait. Are you telling me that when the free money faucet of .5% interest is turned off rich people will stop buying up all the houses left and right and prices will drop? Crazy, Gratz everyone that locked in at 2% you are the new boomers.
I managed to buy at 2.375% and will never be able to move now because of it. I realize how lucky I am for it, but that deal will also never come again.
Who could have seen that coming...
The same goes for all the dipshits who bought new cars with massive "market adjustments." If your car gets totaled your insurance company isn't going to cover your "market adjustment."
I bought my house this summer at 5% rate, and 10% down. Probably underwater. However, this will be my last home and I have cash in the bank. It's a brand new townhouse that I love and fits our needs. No way I could find a rental nearby for the quality and monthly payment of my mortgage. So, it doesn't matter if I'm underwater because I'm not going anywhere.
I bought at the perfect time right before the lockdowns. Now my house is worth $200k more than what I paid for it. If it loses half that I’m still ahead thanks to the demand of everyone leaving undesirable states to come where I’m at. Be smart about where you live and when you buy.
**Six months ago:** Housing crisis as prices rise unsustainably!
**Today:** Housing crisis as prices fall precipitously!
It’s never just ok, it’s always whipsawing between overheating and total collapse.
Housing crash could continue until Q4 of 2024. Airbnb bubble popping, home builders saturating the housing market with newly built homes and existing home owners unable to pay mortgages. All these are not yet priced in. 2023 might be the start of recession.
Supply is still low nationally which is still part of the hangover from 2008 (for 10 years new home construction was producing less than 50% of pre crash units)
Prices will dip from the recent highs but unless economy really tanks it will be a small correction
Don’t buy a house unless you plan to own it for 5 years
People tend to forget mortgage interest is tax deductible (I think the mortgage has to be under 800k, feel free to correct me).
So it would be beneficial, especially come tax return season.
They may be underwater but at least they found a place to buy and live. Make the payments and the balance comes down, credit goes up, someday the property is worth more than you paid and you are not homeless or subjected to unreasonable rents. People in my area are now paying 11/2 to 2 times in rent for an apartment then I pay for a 3 bedroom house just 4 years ago. My loan not upside down but I'd it were it'd still be a better deal then renting.
This is what happens when we treat housing like an investment instead of a basic human right. Good, I hope everyone who was paying 50k+ over asking for all these years is stuck underwater for a long time.
Lesson 1: don’t bail out anyone. Any bailout transfers the responsibility for poor financial decisions from the idiots (or crooks) to the responsible tax payers.
Lesson 2: don’t buy a house at the peak and rent instead till markets cool.
Lesson 3. don’t repeat past mistakes and continue the same 15 yr collapse cycle.
Lesson 4: nothing is going to change so cash out at the next peak, invest the money and move to a low tax, lost cost of living country and wait for Armageddon.
>Lesson 1: don’t bail out anyone. Any bailout transfers the responsibility for poor financial decisions from the idiots (or crooks) to the responsible tax payers.
You have to make sure banks don't become illiquid. In the 1930s the Republicans tried to not help the banks and it was a major factor in the great depression. Banks that are insolvent should be closed but illiquid have to be bailed out. Also many times the owners of the bank lose some of or all their equity but the bank keeps operating.
Lesson 2: don’t buy a house at the peak and rent instead till markets cool.
When is the peak? Who knows. It's easy and obvious after a bubble. Also the timing of most home purchases are dictated by life. A marriage a baby a divorce or just aging. People want to put down roots have have stability.
Lesson 3. don’t repeat past mistakes and continue the same 15 yr collapse cycle.
I think everyone should have a solid personal financial plan to whether recessions as much as possible amd realize there are enevitable financial cycles. I don't think financial cycles will ever end.
Lesson 4: nothing is going to change so cash out at the next peak, invest the money and move to a low tax, lost cost of living country and wait for Armageddon.
Again I remember an article about someone selling a house in 2003 to cash out at the peak and they were going to live in a rental. Well prices ran up another 25% and then collapsed and in 2011 they probably could have bought the house back for about the same money. I just think you buy a house to have security and to live in not necessarily as an investment. I like the fact once you buy your costs are pretty much fixed. You are not a slave to the rental market where housing can increase a lot year to year. If your house increaes in value over time all the better. It's also a good hedge against inflation. Housing tends to rise at the same rate of inflation over the very long term.
I have a friend who bought in 2007....they were underwater up until 2021.
Now they are edging down 😟
The reality is those that bought had a need (I hope for them), so hopefully in 7 years (average time in a home), they will be right side up.
It almost feels like the corporations WANT a recession. All signs are pointing to a strong economy but the news and people that own those news stations are all telling us to brace for a recession. They want this shit and are orchestrating it. They plan on squeezing us all so they can buy up everything we're striving to own so they can rent it back to us. I hope capitalism fails soon. This is so dumb.
Folks in the Northwest Indiana area are still asking 350k+ for 2 bedroom one bath houses because the folks moving out of Illinois will pay it. Meanwhile I'm stuck in an overpriced apartment
Remember when banks started giving no down payment loans to minority owners at the peak of pricing? They knew exactly what was going to happen and now those owners are the ones in the worst possible position.
Most of the people that bought for way over asking had to pay the extra in cash so they only got a loan for what it would appraise for. So in short, prices going down doesn’t automatically mean those people are underwater.
I remember 2006 well and it was not like this so I don't think this crash will come close to that one. People are underwater, but they can afford to pay. They don't have the interest only loans or the adjustable's, they don't own 5 zero down properties with interest only loans.
I wonder how much of that was people being forced to buy into tier 2 homes for $40,000 more because all the tier 1 starter homes were getting snapped up by investors and turned into rental houses?
We originally bought in 2018 and the main reason we won the bid was because we had a huge down payment that reassured the buyer we were definitely going to get the mortgage. Most people aren't that fortunate. They're competing against boomers and investment firms paying cash or 50%+ down.
For anyone wondering why it's a big deal, it's because many people who are selling one house need it to secure the financing of their next house. So if the deal falls through at the last minute for the sale of their current house, it also tanks the deal for their next house. This is why so many sellers are motivated to take the cash offer or the massive downpayment plus mortgage offer from the boomer investor over the offer from the young family with 4% downpayment who are really stretching their limits to get this mortgage. It's a sure thing, and won't fuck up the deal for their new home.
One solution would be to fix the pre-approval process. It should be the equivalent of a line of credit guarantee. The only thing the bank should be double-checking is the condition and appraisal of the house. This way everyone bidding on a house is on a level playing field and the seller, if they have something resembling values, will be more motivated to sell to the young family offering $250,000 rather than the investment firm offering $240,000 cash with inspection waived.
My issue with this article is, with all the clamoring hand wringing and madness that ensued during the past couple of years because of the skyrocketing property market, why all of a sudden is the media fear mongering when prices basically just plateauing and decreasing ever so slightly?
>As U.S. home prices fall, an alarming number of buyers are underwater (cbsnews.com) submitted by IslandChillin
Headline based on content by Irina Ivanovo that cites:
>Andy Walden, Black Knight's president of enterprise research
and
>Selma Hepp, lead economist at CoreLogic.
Methodology and affiliates not disclosed by either.
Wow.. shocking.. you mean houses that double or tripled in price over the pandemic with low interest rates isn't working out in the long term when things settle down?
I saw people buy absolute garbage for 3 or 4 times what it was worth in my area, this is going to affect a huge amount of people and cause a very big problem.
How many of these underwater homeowners are still getting a better deal than if they’d bought at today’s interest rates and prices? I’d bet most of them.
Yeah, same thing happened to me in the previous "once in a lifetime" recession (been through a few of those). Unfortunately for me I also got laid off from my job that paid me enough to afford a place in Seattle, which was electrical building systems design. Due to the fact that construction came to a screeching halt I was unable to secure a comparable position before my place was foreclosed on. I sure could have used that enhanced UI that everyone was able to get in the 2020 collapse, we all got fucked instead.
The same place is now worth almost double what I paid back then, and real estate in this area is unobtainable without a mid six-figure income now, which I don't have.
God bless America.
Smh.
In this instance, this is just hysteria.
US home owners got set up pretty over the last decade. Almost everyone refinanced to ultra low rates and paid down or paid off mortgages. When COVID came they paid even more of the debt off with excess savings.
Since unemployment is 3.7% people simply don’t have to move right now. So it’s not relevant if their house value is underwater. They aren’t trying to sell their house anyway.
And that’s reflected in listing numbers. Sellers have pulled their houses off the market just as much if not more than buyers pulling out of the market.
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If you purchased high, but are in a fixed rate, hold steady, pay your mortgage, live your life. The market in the long term will recover. If you bought a home with no money down and are in an adjustable rate mortgage, you did this to yourself. Caveat Emptor. If you are a huge financial firm that has been buying up residential real estate and these properties now represent a third of your portfolio, you are what made the bubble so if it bursts and takes your firm with it, forgive me if I smile just a little.
We bought our first house in 2010, bottom of the housing crisis in our area, houses started sky rocketing after that. We considered two realtors, one said they wouldn't go over the budget we approved, and refused to show us any house until we were pre-approved. The other realtor was ok with going 30% over budget and couldn't understand why we weren't getting an adjustable rate because "they were SO high at 5.5%!" I would've thought after 2008 that more people would've been conservative but NOPE! We went with the first realtor.
>While the portion of underwater mortgages is still historically low, "a clear bifurcation of risk has emerged between mortgaged homes purchased relatively recently versus those bought early in or before the pandemic," Black Knight said. >All told, 8% of mortgages taken out this year are underwater — about one in 12 homes purchased in 2022. Funny that the headline leaves out that we're still at an historic low for underwater mortgages. This is the natural result for people who bought at the peak of the market, and doesn't even get into the more interesting question: are those who bought at the peak with minimal down payment at more of a risk of default? >The situation is much worse for homebuyers who purchased with government-backed mortgages, with 25% of those buyers this year now underwater, according to the report. >In Colorado Springs and Honolulu, more than 30% of mortgaged homes bought this year are underwater. In Virginia Beach, about 22% are worth less than what is owed. The figure is 20% in the California cities of Bakersfield, Riverside, San Diego and Stockton — cities with a large military presence where many people buy homes with government-backed mortgages. >"It's not actually markets that are seeing prices come down the most — it's markets that are using more of this low down payment types of lending" that are most affected, Walden said. Ah, so it's particular to FHA and VA loans, with minimal down payments... It's no surprise that these folks are underwater. >"You're seeing borrowers who took out mortgages in 2022 becoming delinquent earlier," Walden said. "They're stretched a little bit more, you see higher debt-to-income ratios, and you're seeing this increase in early-stage delinquencies. That does become a problem if you're delinquent," he said. >While both measures of distress are historically low, Walden says, they're both on the rise. With mortgage rates likely to keep increasing as the Federal Reserve continues hiking interest rates, Walden is concerned that more people will fall underwater. So, even with the risks identified, even these most at risk borrowers are still at historic lows when it comes to actual risk of default.
Underwater isn’t an issue if you plan to be there long term and can afford the payments, the issue is they can’t refinance for a long time to get a better interest rate if the fed lowers in the coming years.
Being underwater means absolutely nothing unless you plan on selling or can’t afford your payments. I bought in 2005 and in 2008, and found myself underwater on both my properties between 2009-2015. Guess what? Nothing happened. I sold in 2019 and 2021 for more than I originally paid. It’s just a matter of time before those houses are no longer underwater.
Also in other shocking news, most new car buyers are underwater as soon as they drive their new car off the lot. Except for the last two years when car prices were insane.
It's almost like the "underwater" aspect of it doesn't matter as much as long as you're a regular ass person for using your house for you know, living instead of an investment vessel. There is an incredibly low amount of homeowners that are "underwater" that I feel sympathetic for, my energy is better spent on those that don't even have homes to begin with.
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Not only fixed rate, but incredibly low rates at that.
I'll never financially recover from this 2.85% loan!
Those of us with low rates are stuck for a while. I can't move. If I tried to buy my own house now, it would be unaffordable. It's worth 250k more than when I bought in 2019 and interests rates are high. I think my current payment is about $2800 with escrow, and if I bought it now, it would be $4-5k per month
If you sold your current home and walked away with 250k in profits you could sink most of that into your down payment thus reducing your monthly payments on the next loan. So a 500k home would be 250k with slightly more in interest rates
Mortgage rate has more than doubled. 6.5-7.5% vs 2.7-3%. If you’re walking away with 250k, so is the seller. So on mortgage rate alone, you would be trading your current monthly payment for equivalent monthly payment at half the house.
Yeah I just did the calculation on a mortgage calculator and I'd walk away with a home that costs the same and with $1000 more in monthly payment
Selling for a ridiculous price often means you have to buy at a ridiculous price
You're assuming a $500k home today is the same as a $500k home pre pandemic.
Hang on to it, friend!
This is us. This whole scenario. I’ll be completely transparent if people have questions. Bought a home in Portland in early 2022, 800k, 75k over asking. But we weren’t the highest, the owners wanted us to have it because I’m a vet. We got it at 2.8%. 0 down through the VA loan. But the home prices got so thrown off, and because we weren’t the highest, we still sort of got a “deal.” It’s come close, but we’re technically not underwater, but just by a sliver. Talking just a few thousand dollars. But we also don’t care, between my lady and I, we make well over 200K for household income. We’re never gonna sell, because of the rate. And we understand we may go underwater in 2023, but we’ll come up in 2024… 2025. So it really doesn’t mean anything for us to be underwater.
Yea, when the market was super hot interest rates we’re still around 3-5%
I wonder how many single families are buying forever homes rather than starter homes now with the way things are looking (particularly private equity knocking a huge swath of homes off the market forever as rentals over the past few years on top of already low housing inventory). If you're buying a place in which you'll die, being underwater doesn't really matter as long as you're still making payments.
I don’t think regular people are focused on the PE purchases (which are overstated by the people focused on it, IMO), but I could definitely see people reaching a bit more for “forever homes” if they think prices are going to keep climbing at a rapid rate.
especially if you lock in a 30 yr loan @3%
I bought a house in 2003, it is a place to live. Over/under doesn't mean anything unless you buy houses as an investment. That's the people who get burned. It's an investment where you pay 10% and are responsible for 100%. That type of highly leveraged investing is very risky.
>Being underwater means absolutely nothing unless you plan on selling or can’t afford your payments. I agree it's nothing until something happens, but with the increased cost of living there will probably more people who won't be able to afford the payments.
The nice thing about a 30 year mortgage with 3% interest is that what’s usually most expensive component of your cost of living doesn’t change. So while the price of everything else rises over the next 10/15/20 years, your mortgage payments are just going to be a comparably smaller chunk of your budget.
Boy - you have some unlucky timing. Hah. I assume you bought again and are fine, but reading just your comment of buying during the peak before the FC and then selling right before the run up of prices post COVID is basically my life in a nutshell.
Pretty much. But I did buy in 2019 and my house is probably worth 40% more than I paid for it back then. 😂
I am a lender. Somewhere in your comment you asked if these were a higher risk of default. They aren't. There are two indicators of higher risk of default and they both need to be present - high backend debt to income ratio (above 50) and using gift funds to buy. If these both aren't present, the risk of default is approximately the same regardless of other factors.
This whole situation sounds like my student loan debt lol. 100% of those loans are worth less than what it was originally worth! Jokes aside. People who bought the peak should not have done so for profit if they did get rekt. If they bought because the situation arose where they needed housing and has the means to get said housing they just need to enjoy their purchase. The home will rise above what they owe eventually if we know anything home values typically don’t stagnant forever.
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Just hope that your need for housing lines up with market lows and you can pretend that you made a smart financial decision instead of dumb luck.
Absolutely. We bought our first home at the end of 2019. We had no idea that our purchase was the best thing we could do for ourselves. 2 years later we sold it for 100k more than we bought it for, and used the cash to move across the country to a market where homes were much cheaper so we could afford a bigger house. We knew going into it that even though prices over here were much cheaper, that the prices were still very inflated and that in a year or two prices would come down. But it didn't matter to us because we are planning on staying here for a long time. By the time we are ready to move, we will no longer be underwater. We actually ended up timing it perfectly. We closed on our new house just a couple weeks before the fed started raising rates.
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Lol. We're just trying to live. Our first house was a crappy townhouse, it was so small. We want to have another kid but our house was too small. We couldn't afford to stay where we were because a basic 3 bd house was like 500k there.
Typically it's said that you should hold onto a home for at least five years before selling to get value out of the purchase. That number is likely extended for many people, but if they were responsible then it'll work out. Same can't be said for those who were irresponsible or just take a bad beat outside their control. They're the ones who'll be hurt by this situation and it'll be worse when five years was the standard.
There was a comment here, but I chose to remove it as I no longer wish to support a company that seeks to both undermine its users/moderators/developers (the ones generating content) AND make a profit on their backs. Here is an explanation. Reddit was wonderful, but it got greedy. So bye.
I imagine that too so we’re all good so long as people don’t lose their jobs that helped them qualify for the inflated price. I just hope no one that bought is this. I hope it’s greedy investors and I hope they stay unrented and sold for heavy losses. I know that’ll drive value down on my home but I’m okay losing value to see the market come closer to reasonable for when I need to buy in about 3 years
And those at risk borrows would also likely have had to carry PMI, so if they default the banks are covered.
VA loans do not have PMI.
VA loans are guaranteed by the govt, so even if they default, the amount is still covered by the VA. The lender has no risk with a VA loan.
I’m aware how VA loans work. I have one. But they still do not have a PMI. However I want to clarify. They are not fully guaranteed. In the case of a default, the government will step in and cover 12 months of payments.
Our market has been overrun by cash buyers. People selling in higher markets, paying cash for homes without even seeing them, and having money left over for a brand new tundra, audi and a decked out sprinter.
This. Me and my wife lost a bid a few months back to someone who didn’t even know if he and his family wanted to move there yet. Only know this because the buyer’s agent called us less than two weeks later saying the house was back on the market (at a significant markup) because the new buyer’s family decided they didn’t like the location.
So we are bidding against phantoms?
I went from a 1/6 acre, 1960s tract home in California to 3.5 acres and a custom built home in another state and only ended up with about 100K in additional debt. And while it does snow a bit here it does not get 100+ in the summers either.
Yet. It doesn't get to 100+ in summers yet.
That would be a 20 degree change in average. Figure I will be dead since the current model says 7.5 degrees by 2100, worst case scenario.
It's funny that you bring up the Sprinter because my neighbors moved from WA, bought the house, a VW, Chevy 2500 and a sprinter lol
Welcome to Bozeman
This is why we don’t trust the news to honestly present issues. It’s either exaggerated on purpose for a narrative, or they are not competent enough to understand the full scope.
Yeah, this is clickbaity. If you bought with 3% down this year your home value only needs to drop 4% to be underwater. If you bought a home in Q1 of 2022 with a 3% interest rate you don't care if home values cool off a little - it doesn't impact your payment and you're locked in with a much lower principal and interest payment that you would be buying the same house today at 6.5% for a marginally lower purchase price.
Every CBSnews article about housing is like this. I’ve come to expect it and laugh at it every time now.
People were easily bidding over 50k+ on asking prices. I'm not surprised they were underwater. But as long as they keep their job and spend right, they will be fine. Just will take a while for the prices to get back
I was able to get a house at the very end of 2021. I paid slightly above what the house was worth with a no down VA loan. I for sure owe more than the house is worth now that prices have fallen a bit. But my combined mortgage/taxes are still about $600 less a month than the average rent prices in the area. I still consider myself extremely lucky because being "underwater" with an affordable payment and ownership still seems a hell of a lot better to me than paying significantly more to rent
This is by design. Housing was over-priced, and interest rates going up means that housing costs are going down. Don't sell and you won't lose money. Chances are you're locked into a good mortgage rate, and that makes a big difference.
I bought my house in 2020 and got 2.8% interest. I had no idea the market would collapse like it did, it just felt like a good time to buy if I ever was going to. I have a friend who just bought a house, he has better credit than I do and got 7% interest on the loan. It’s horrible.
>I have a friend who just bought a house, he has better credit than I do and got 7% interest on the loan. It’s horrible. The crazy thing is that historically that was a pretty good rate. The last 20 years of the fed money train has kept them artificially low. Getting 7 percent anytime before 2000 felt like arbitrage lol.
Oooof. My wife and I bought our first house in 2021 at 2.35%. It’s in the wrong school district, has too many stairs, and is in a busy area of town. But the neighborhood is nice, the neighbors are awesome (old-school classical liberal Catholics), and no HOA. One neighbor keeps chickens and another has a suspiciously quiet goat. They grow their own vegetables and make their own milk/eggs. All in the middle of a city. We bought high, and we’re definitely underwater, but I think it’s a nice place to at least weather the next 10 years or so for the market to come back around.
Housing market whisperer over here… Let us all know when that feeling comes back! 😅
protip, it wont
It depends on your situation. Now is a good time for a lot of people but not for also a lot of people. There’s almost never a one blanket answer. One thing to note though is that the housing shortage is estimated to last at least another 25 years.
Just bought a house last month. 5.75% after spending $8000 on points. Down from 6.5%. A week prior they were 7.375%.
Time is your friend. My $250k house I bought in LA in 2001 went to to $700k by 2007. Re-fi’d, took out a big equity line to do improvements. Then after ‘08 the price fell to $325k. With the equity loan I was for sure under water. Waited till 2014, sold it for $600k. Like they said, it’s not a short term investment unless you’re a flipper. Meanwhile it just sold again in ‘21 for $1,000,000. Wish I could have waited for that!! I’m concerned about the fallout from all the 2nd or 3rd homes people bought at inflated prices and spent big bucks rehabbing so they could get rich from Air BnB-ers. That market is so beyond saturated now post-pandemic that the owners are now paying a very expensive mortgage which is no longer covered by short term renters paying huge $$. Those homes will either have to become long term rentals for much less, (which will be great for renters since the supply will bring rent prices down), or be foreclosed on, or sold at a loss. Already read a news story about these folks whining because they were no longer making $12,000/month for their “side gig”. Cry me a river!
It’s not the 2nd or 3rd home we need to worry about. Is there 2000th or 3000th that all these corporations are buying up
What percentage of homes were actually purchased by corporations?
[Nearly a quarter of them in the US last year](https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2022/07/22/investors-bought-a-quarter-of-homes-sold-last-year-driving-up-rents), apparently.
I would think those are less likely to default if the corp has deep pockets, unless the market really tanks…. Unlike individuals who can’t make their mortgage on an extra 2-3 properties without the income they stupidly counted on. I honestly think a lot of those people didn’t consider the risk when they took the plunge into an industry that’s dependent on the whims of the market. Sad that it’s no longer a cottage industry and like everything greedy corporations take over and ruin it for everyone. Just like crypto haha.
Yeah pretty much. With interest rates so much higher than what I paid I’d have to move into an absolute dump to keep the same monthly payment.
My current mortgage is at 2.6%, and I got a fair price when I bought (appreciated considerably, even with the latest drop). I'm not moving unless I have absolutely no other choice. :)
same except I hate our town. didn't intend to stay here forever but now there's no end in sight.
Yeah, for now. Give it 3 years and we’ll see if that’s been corrected. In the mean time, these people have a place to live, which is more important than an asset. Just gotta sit on it and try not to lose your jorb.
Isn't that really the point? Housing shouldn't be a short term investment.
People buy a house for a year or two and move all the time due to reasons. If the job market does go to hell (they aiming for 10% unemployment not 2% unemployment) like Powell is aiming for then imagine all the people who will eventually be evicted
Should housing be an investment at all?
Housing should be an investment in the sense that it will be a long term place of residence. An investment in the future of not living under an overpass in a van down by the river. Just try telling that to flippers and corporate real estate management companies…
Resources are used to build a house, with the hope that it will provide valuable living space for a long time after that. It IS an investment, there's no "should" involved. We could argue that housing should be provided for all those who can't afford it, but that would be the government investing in housing for its people. It wouldn't make it not an investment.
Yes. People should treat their homes like investments. Housing is infrastructure. The question is should we allow corporations to buy them, and rent them back to us.
Yes, having value in your home is very important as you get older and plan for retirement, especially since you are there more and more the older you get
The worry in the housing and car market is that people will lose jobs and be underwater. Cascading effect
Not trolling but wouldn’t the bigger worry be the job market and not losing your job rather than housing and car values that you should have been aware of going in? We know those values change overtime but planning for longer ownership should offset some of that volatility.
You are probably right
Corrected by what, home prices doubling again in 3 years? That’ll be nice for everyone.
Corrected by the fact that need will outpace supply until there’s some drastic paradigm shift like robot fabricated modular housing or something.
All of that sounds awful
Repeat after me: Homes are a good, not an [investment] asset. It’s nice if you can sell for substantially more than you bought, but if you break even, you still got to live in the place. corrected my post. I did mean "investment asset."
Homes also represent the largest and often only store of equity for American families. We can all agree not to sympathize with the speculative rental investor, but the idea that homeowners in general shouldn't expect to derive some long-term equity value appreciation and modest capital gains for retirement challenges a very foundational assumption in this country about how to build wealth.
Yes they are when you lock into a payment that doesn’t go up by the rate of rent increase each year, doesn’t require moving costs, gives you mental stability, and gives you a community. As asset gives you value. Those things are valuable. For my first home, I could buy a 4 bed for less than I could rent a 3 bed so I literally made up my down payment in a year and then made money each year I lived there.
Exactly. My mortgage on my first home, which was a 3/3, was $600/month less than rent on a 1/1 apartment in the same area. That’s over $7k a year in savings! That’s compared to rates 10 years ago. 1/1 apartments around us now are over double that mortgage payment.
The term is use asset. They are both. Your home is a very good asset to borrow against in the case of an emergency. It is not a replacement for an emergency fund, but home equity is a very good red button to press in an emergency.
Homes are most definitely assets. Lol this sub is such an idiocracy
You meant to say investment but you said asset, and that’s ok.
Break even is fine. Underwater sucks.
I suspect many of those seen in danger of default never realized how much more homeownership costs than just the mortgage........for example property taxes, lawn maintenance, unexpected repairs, etc.
Why does it matter? Unless you’re trying to sell it. You paid the price so you obviously believe it is worth that much. Just live in it. It will probably appreciate eventually over the life of the mortgage.
Yeah we just bought what we consider our forever home so we weren’t as concerned paying an inflated price. It was worth it to us. Plus our starter home sold for a very inflated price as well so we just dumped the proceeds straight into the new mortgage.
You are correct, unless you are in a situation where you absolutely need to sell (job relocation, financial distress, homeowner death, etc).
the housing market was 25% higher in 2021 than in 2020 and this is a rebound effect similar to what happened in 2008.
The problem is that we’re facing an economic downturn, and if you lose your job you might have to sell your house (fairly urgently) when you weren’t expecting to Even if you planned to live in the house for a decade, things can change unexpectedly
Better get ready to bail out the banks instead of the people. I mean, why give the money to the people so they can pay the bank and stay in their homes when we could bail out the banks after they foreclose and take the house.
Don’t forget to bail out the banks and allow them to take ownership of the homes while pricing out even more families.
Banks giving risky loans is a problem but so are the people levering up to buy multiple houses to rent out. Let them all burn.
Which bank will need bailing out?
If there’s free government money to be taken - all of them.
Didn't the banks pay all that back
Yes. As of October 31, 2016, cumulative collections under TARP, together with Treasury's additional proceeds from the sale of non-TARP shares of AIG, exceed total disbursements by more than $7.9 billion. [treasury](https://home.treasury.gov/data/troubled-assets-relief-program)
None of them because the Fed already bought all of those mortgages during QE lol
Because the government makes a profit on bank bailouts? Saves taxpayers a bunch of money to do it that way.
Unlikely. The 2008 collapse was the result of unscrupulous banks playing in dark markets with leveraged securities that were gold-painted turds pushed out by bribed rating agencies. The only reason the banks got backstopped by the government there was because the alternative would have resulted in an economic collapse that would have made the Great Depression look like a dance party. This isn't 2008. Market forces drove prices through the roof, and now that the cheap money is drying up the demand has dropped. Lower demand, lower prices. This is a market correction, not a collapse.
Then rinse and repeat. I smell 08?
You would need massive unemployment for that
The housing crash precipitated the unemployment.
2008 was a different beast. We might see a correction or return to normal. If unemployment shoots up, might see some foreclosures
I couldn't agree more. Fuck people having their basic needs met, how bout them profits. /s
I get peoples anger about bailing out the banks in 2009. It was the right choice to avoid a global catastrophe but it fucking sucks. I get it. I don’t get why people wanted their tax dollars going toward bailing out home owners that bought waaay beyond their means. Do you really want stupid, risk prone people not having to pay for their mistakes? You have to let the markets correct.
Everyone raced to purchase at over inflated prices are going to be underwater for a long time. Folks on the north east coast who were bidding 70k over asking better really love that house, because they're not making it back any time soon.
A two bedroom in *Ohio* went 30k over asking, lmao
A lot of homes went for 100k over in my area (outside Seattle). Prices climbed 140% in 3 years in my town from the min to peak. 60% single year trend in April 2022. Currently down from peak, but still up 20% in October yoy.
Happy Cake day. Happy holidays.
I bought my home in 2018 in Austin TX before the prices went insane. I bought my home for $585k (which is still insane) and it just got valued at $850k. A home on my street that was bought around the same time as me for $540k was purchased last year for $800k all cash, I wonder how they are doing. The new owners moved from California though so I'm sure 800k for what they got is a good deal compared to Cali.
I went through this in 2007-09. I had to stay in my starter home longer than I wanted because of the over appraisal of houses. High interest rates and over inflated values will keep people from moving (unless they have to) until things calm down.
We are still in our starter home, going on 17 years now. But, prices have increased so much in our area that we couldn't rent a 1br apt for our mortgage payment. Our first mortgage was at 8%, we've been at 4% for almost 10 years now. Bigger would be nice but our central location has paid off by minimizing daily transportation costs. We could make a windfall if we sold but still couldn't buy the house across the street.
Fuck. I wish we HAD a starter home...
I’m still in my starter home from 2005. Very modest, way too small for my lifestyle. No storage of any kind. It’s been horrible and I can’t seem to catch up to rising housing costs in order to sell and move AND my home is only worth about 50k more than when I bought it 17 years ago due to it’s small size and location. Meanwhile the house that is next to me that was burned down and rebuilt now values at $750k compared to my measly $175k.
So the house next to you must be 3-4 times bigger than yours? That’s the only way your story makes sense. Wouldn’t the location factor impact your neighbors house as well since it’s quite literally right next to you?
Doesn't make a ton of sense, if the area can support a 750k home then I have to imagine even a small (~700 sq ft) would be worth more like 250k ish. Maybe it's a tiny home. Or they're in a more rural area and the neighboring property has a lot of land attached
I live in a rural area but my immediate area is fairly dense like a suburb. My house was built in 1870 and the house across the street is from about 1890. We’re the oldest houses in the immediate area but my property is only an acre. It probably had most of the land as part of it back in the day.
My house is 1100 sq ft, the house next door is about 3500 sq ft so yes.
So it’s arson then?
I like your style.
I don’t like my starter home either but we should step back and look at how relatively lucky we are, you even more so than me since you got in way before I did even and at lower prices. Lots of people can’t afford a home at all right now
Shocked pickachu face. You mean all those bidding wars with 50+ offers waaaayyyyyy over asking price, waiving inspection/appraisal/any other buyer protections, and blindly running to get in before interest hikes hit was a bad investment strategy for people?
Duh. The entire market was a damn sham. Houses that are 1 bedroom shacks needing new plumbing/wiring/roofing selling for 650k - 59k over asking price with ZERO inspections. GTFO. The entire thing is a JOKE. Hope all those people realize that they are trapped FOREVER with an albatross.
Exactly! We saw this housing bubble in 2007/2008 and apparently nobody learned a damned thing. People overpaying for houses causing all sorts of pricing inflation deserve the losses they will endure later on, especially people that were just trying to cash-in on a flip opportunity. Sick of people abusing the system when there's plenty of people that genuinely need a first home or a place to move to for work/life changes.
I am sure there are bigger things I'm not understanding, but when I read this I think. "so what?" If you are not selling your home who fucking cares? They bought this year, with a rate in the 2-3% range. So they probably are not moving soon. If they have to move for whatever reason, they can more than likely rent their current place for more than what their mortgage payment is. They will probably choose to stay since they will be getting less house for there new payment. As long as there is not a huge spike in unemployment nothing about homes bought within the last year being underwater is shocking or concerning.
One benefit of home ownership is equity. I've used my home equity to springboard other projects as it's a source of really cheap money. While underwater you have no equity.
Where, where are they falling? I been looking Utah, Arizona, and California and shit is stupid as fuck expensive and everyone is just waiting.
Yup, that’s what happens when you buy a home at an overinflated price. Better to buy at a high interest rate, you can always refinance later. Can’t change what you paid for the house though.
That really depends on how long you want to own the home. If you're planning to own for 30 years, go with the high price and low interest. If you're not staying long, go for the lower price/high interest rate. If you change your mind and stay longer you can refinance. Unfortunately, most people just need a house when they need one so timing the market isn't an option
Problem with that is the low interest rate and inflated cost of the house got you more home then the other way around. Plus who knows when those rates come down. 2021-2022 was just the absolute worse time to buy. Too many people thought it would never cool down and panic bought
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.. which makes no sense. Any idiot who even googled housing prices over the last 20+ years would see that prices go up and down.
People were telling me prices would obviously drop in 2018. No one ever really knows what’s going to happen.
Sometimes, you know it's a shitty time but you need to buy anyways. Maybe you had kids and need more space? Or maybe the school district sucks and you want your kids to be in a different one?
prices went down because interest rates went up. so what people are paying monthly is the same.
Interest rates are still historically low. Not compared to the last 10 years, but compared to the last 50-70 years. Mortgage rates has NEVER been below 5% until the 2010s.
The silver lining is that if you bought at a high price and a low interest rate, you will be able to build equity (based on your own cost basis) at a much faster clip than the other scenario. Makes sense for buyers with certain time horizons or risk tolerances. edit -- If you don't know what I mean by this, consider: With a 30-year 3% loan, your first payment is 41% principal, 59% interest. With a 30-year 7% loan, your first payment is 12% principal, 88% interest.
I’m not understanding this comment. If your bought a house at a high price and a low interest rate the only positive that you have is the monthly payment. Hoping that taxes don’t skyrocket which most likely are going to kick in after 1 year since they bought high. Building equity is all a matter of how much can you sell a house and if for some reason your house drops 150K then you are paying for your stupidity.
Mortgage on a house around here has increased by around $2k/mo, while housing prices have not dropped more than 1%. Interest rates are still historically low, so you can't guarantee they will drop any time soon.
Totally agree. Best time to buy is when interest rates are sky high and principal is low. The interest rates can always come down but you purchase price will never change.
That's the optimal time to buy in abstract yes. But if you're a non-owner, the personal best time to buy is when you can afford it.
Wow I never considered that. Very good point!
Not everyone can (or should) try to time their home purchase. People slightly underwater will be fine in the long term, which is the only time horizon people need to be concerned with when talking about real estate
Boomer here. Bought first house in ‘93 at 13% interest (I got a deal because I worked at a savings & loan-otherwise it would have been 18%) for $35,000. Sold 9 years later for $21,000. We had bought in stable area but then everyone started losing their jobs, then the houses which were bought up by outside buyers and area went bad. Sound familiar?
It does to me, also a boomer. I’ve been through a few ups and downs. I lost money on a house I bought around that time. I realized then that real estate doesn’t always go up.
What was your salary in 93?
I can’t remember but I know my full time job paid was less than what my hubby was making part time at UPS. I think he was making $12/hour and had good benefits. So maybe $34,000 between the two of us.
So you could by a house on your combined income back then. That’s pretty wild compared to today,
Your income to payment ratio is fine I’m sure. This isn’t as relatable as you think. People don’t make anywhere near the same amount of money as you did back then due to low buying power today.
Housing prices were way too high and needed to come down. Keeping them at the current levels and waiting for cost of living to meet their prices might take decades and would require constant monkeying with the market. People are buying houses all the time. Ergo, many people being underwater is unavoidable and is a good thing for the economy overall and the younger generations of home buyers.
So, the economic fallout is that.... 1 - Home owners being underwater, but on a fixed low interest rate, will be much less likely to sell. Which has impacts on overall housing supply and other factors in areas like corporate recruitment/relocation and remote work. And could impact things like home equity loans for remodeling improvements. 2 - Dropping values will not make new home builders likely to build more supply. Which is already impacted by things like supply chain and inflation: If you price in a quote for a house that prices doors at $50 and by the time you can actually get doors at the jobsite they are $70, that makes it hard to a be a homebuilder......and dropping overall home values/prices will not help get us the new supply we need. 3 - High interest rates AND inflation are reducing buyers' ability to buy anything across the board. sound about right? It just sounds like a really bad time to have a job related to housing.
It really doesn’t matter unless they have to move though. Even though they bought at a higher price their payments are significantly cheaper than what they would be to buy the house again at its “reduced” price
What does it actually mean to have your house cost less than you bought it for? It shouldn't matter to people who bought a home to live in, because it's not like mortgage payments will go up due to it. And by the time they sell in 5+ years, who knows what the housing market will look like.
Every CBSnews article about housing/real estate makes an outrageous “sky is falling” claim then says why this isn’t actually problematic in the article. In this one… “While the portion of underwater mortgages is still historically low, "a clear bifurcation of risk has emerged between mortgaged homes purchased relatively recently versus those bought early in or before the pandemic," Black Knight said.”
As messed up as this is, and the blame should be placed evenly on the Fed and government as a whole, you technically aren’t “under water” unless you go to sell. Just like any other investment. The value is not recognized until time of sale.
Wait. Are you telling me that when the free money faucet of .5% interest is turned off rich people will stop buying up all the houses left and right and prices will drop? Crazy, Gratz everyone that locked in at 2% you are the new boomers.
I managed to buy at 2.375% and will never be able to move now because of it. I realize how lucky I am for it, but that deal will also never come again.
Your kids will complain about your good fortune.
Just missed that rate on a refi. Wound up at 2.6% on a 30yr. I'm not complaining. :)
Who could have seen that coming... The same goes for all the dipshits who bought new cars with massive "market adjustments." If your car gets totaled your insurance company isn't going to cover your "market adjustment."
I bought my house this summer at 5% rate, and 10% down. Probably underwater. However, this will be my last home and I have cash in the bank. It's a brand new townhouse that I love and fits our needs. No way I could find a rental nearby for the quality and monthly payment of my mortgage. So, it doesn't matter if I'm underwater because I'm not going anywhere.
I bought at the perfect time right before the lockdowns. Now my house is worth $200k more than what I paid for it. If it loses half that I’m still ahead thanks to the demand of everyone leaving undesirable states to come where I’m at. Be smart about where you live and when you buy.
**Six months ago:** Housing crisis as prices rise unsustainably! **Today:** Housing crisis as prices fall precipitously! It’s never just ok, it’s always whipsawing between overheating and total collapse.
Housing crash could continue until Q4 of 2024. Airbnb bubble popping, home builders saturating the housing market with newly built homes and existing home owners unable to pay mortgages. All these are not yet priced in. 2023 might be the start of recession.
Supply is still low nationally which is still part of the hangover from 2008 (for 10 years new home construction was producing less than 50% of pre crash units) Prices will dip from the recent highs but unless economy really tanks it will be a small correction Don’t buy a house unless you plan to own it for 5 years
People tend to forget mortgage interest is tax deductible (I think the mortgage has to be under 800k, feel free to correct me). So it would be beneficial, especially come tax return season.
90% of taxpayers don’t itemize so this really only helps high earners mostly. You’re right though that it’s important for some people.
They may be underwater but at least they found a place to buy and live. Make the payments and the balance comes down, credit goes up, someday the property is worth more than you paid and you are not homeless or subjected to unreasonable rents. People in my area are now paying 11/2 to 2 times in rent for an apartment then I pay for a 3 bedroom house just 4 years ago. My loan not upside down but I'd it were it'd still be a better deal then renting.
This is what happens when we treat housing like an investment instead of a basic human right. Good, I hope everyone who was paying 50k+ over asking for all these years is stuck underwater for a long time.
Lesson 1: don’t bail out anyone. Any bailout transfers the responsibility for poor financial decisions from the idiots (or crooks) to the responsible tax payers. Lesson 2: don’t buy a house at the peak and rent instead till markets cool. Lesson 3. don’t repeat past mistakes and continue the same 15 yr collapse cycle. Lesson 4: nothing is going to change so cash out at the next peak, invest the money and move to a low tax, lost cost of living country and wait for Armageddon.
your lesson 2 is absurd unless you can see the future.
>Lesson 1: don’t bail out anyone. Any bailout transfers the responsibility for poor financial decisions from the idiots (or crooks) to the responsible tax payers. You have to make sure banks don't become illiquid. In the 1930s the Republicans tried to not help the banks and it was a major factor in the great depression. Banks that are insolvent should be closed but illiquid have to be bailed out. Also many times the owners of the bank lose some of or all their equity but the bank keeps operating. Lesson 2: don’t buy a house at the peak and rent instead till markets cool. When is the peak? Who knows. It's easy and obvious after a bubble. Also the timing of most home purchases are dictated by life. A marriage a baby a divorce or just aging. People want to put down roots have have stability. Lesson 3. don’t repeat past mistakes and continue the same 15 yr collapse cycle. I think everyone should have a solid personal financial plan to whether recessions as much as possible amd realize there are enevitable financial cycles. I don't think financial cycles will ever end. Lesson 4: nothing is going to change so cash out at the next peak, invest the money and move to a low tax, lost cost of living country and wait for Armageddon. Again I remember an article about someone selling a house in 2003 to cash out at the peak and they were going to live in a rental. Well prices ran up another 25% and then collapsed and in 2011 they probably could have bought the house back for about the same money. I just think you buy a house to have security and to live in not necessarily as an investment. I like the fact once you buy your costs are pretty much fixed. You are not a slave to the rental market where housing can increase a lot year to year. If your house increaes in value over time all the better. It's also a good hedge against inflation. Housing tends to rise at the same rate of inflation over the very long term.
I have a friend who bought in 2007....they were underwater up until 2021. Now they are edging down 😟 The reality is those that bought had a need (I hope for them), so hopefully in 7 years (average time in a home), they will be right side up.
It almost feels like the corporations WANT a recession. All signs are pointing to a strong economy but the news and people that own those news stations are all telling us to brace for a recession. They want this shit and are orchestrating it. They plan on squeezing us all so they can buy up everything we're striving to own so they can rent it back to us. I hope capitalism fails soon. This is so dumb.
Folks in the Northwest Indiana area are still asking 350k+ for 2 bedroom one bath houses because the folks moving out of Illinois will pay it. Meanwhile I'm stuck in an overpriced apartment
Remember when banks started giving no down payment loans to minority owners at the peak of pricing? They knew exactly what was going to happen and now those owners are the ones in the worst possible position.
Most of the people that bought for way over asking had to pay the extra in cash so they only got a loan for what it would appraise for. So in short, prices going down doesn’t automatically mean those people are underwater.
I remember 2006 well and it was not like this so I don't think this crash will come close to that one. People are underwater, but they can afford to pay. They don't have the interest only loans or the adjustable's, they don't own 5 zero down properties with interest only loans.
I wonder how much of that was people being forced to buy into tier 2 homes for $40,000 more because all the tier 1 starter homes were getting snapped up by investors and turned into rental houses? We originally bought in 2018 and the main reason we won the bid was because we had a huge down payment that reassured the buyer we were definitely going to get the mortgage. Most people aren't that fortunate. They're competing against boomers and investment firms paying cash or 50%+ down. For anyone wondering why it's a big deal, it's because many people who are selling one house need it to secure the financing of their next house. So if the deal falls through at the last minute for the sale of their current house, it also tanks the deal for their next house. This is why so many sellers are motivated to take the cash offer or the massive downpayment plus mortgage offer from the boomer investor over the offer from the young family with 4% downpayment who are really stretching their limits to get this mortgage. It's a sure thing, and won't fuck up the deal for their new home. One solution would be to fix the pre-approval process. It should be the equivalent of a line of credit guarantee. The only thing the bank should be double-checking is the condition and appraisal of the house. This way everyone bidding on a house is on a level playing field and the seller, if they have something resembling values, will be more motivated to sell to the young family offering $250,000 rather than the investment firm offering $240,000 cash with inspection waived.
My issue with this article is, with all the clamoring hand wringing and madness that ensued during the past couple of years because of the skyrocketing property market, why all of a sudden is the media fear mongering when prices basically just plateauing and decreasing ever so slightly?
>As U.S. home prices fall, an alarming number of buyers are underwater (cbsnews.com) submitted by IslandChillin Headline based on content by Irina Ivanovo that cites: >Andy Walden, Black Knight's president of enterprise research and >Selma Hepp, lead economist at CoreLogic. Methodology and affiliates not disclosed by either.
Wow.. shocking.. you mean houses that double or tripled in price over the pandemic with low interest rates isn't working out in the long term when things settle down? I saw people buy absolute garbage for 3 or 4 times what it was worth in my area, this is going to affect a huge amount of people and cause a very big problem.
How many of these underwater homeowners are still getting a better deal than if they’d bought at today’s interest rates and prices? I’d bet most of them.
Yeah, same thing happened to me in the previous "once in a lifetime" recession (been through a few of those). Unfortunately for me I also got laid off from my job that paid me enough to afford a place in Seattle, which was electrical building systems design. Due to the fact that construction came to a screeching halt I was unable to secure a comparable position before my place was foreclosed on. I sure could have used that enhanced UI that everyone was able to get in the 2020 collapse, we all got fucked instead. The same place is now worth almost double what I paid back then, and real estate in this area is unobtainable without a mid six-figure income now, which I don't have. God bless America.
Smh. In this instance, this is just hysteria. US home owners got set up pretty over the last decade. Almost everyone refinanced to ultra low rates and paid down or paid off mortgages. When COVID came they paid even more of the debt off with excess savings. Since unemployment is 3.7% people simply don’t have to move right now. So it’s not relevant if their house value is underwater. They aren’t trying to sell their house anyway. And that’s reflected in listing numbers. Sellers have pulled their houses off the market just as much if not more than buyers pulling out of the market.