Los Angeles Homes Underwater
As reported by Zillow, and L.A. Land, many homes in the Los Angeles Area owe more on their mortgages than the houses are worth.
It breaks down this way:
Homes bought in (2003) 1% are underwater
Homes bought in (2004) 24% are underwater
Homes bought in (2005) 57% are underwater
Homes bought in (2006) 71% are underwater
Homes bought in (2007) 56% are underwater
Homes bought in (2008) 13% are underwater
The big problem here is, many of the exotic loan products have a clause where payments adjust automatically when the Loan to Value (LTV) reaches 110 - 125%, not 5-7 years from the start of the loan. With rapidly declining prices and little money invested, some homeowners will just walk away, causing more foreclosures and further price declines.
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4 comments:
With some buyers having financed their home purchases 100% from 2003- 2007, what will keep them from simply mailing in their keys (Jingle Mail)? Now I am hearing that underwater buyers are keeping payments current on their bad purchase (2003-2007) and trying to close on a second home (at much lower prices). Once they close on the second home they let the first one go back to the bank. Hence, the rise in foreclosure sales.30-40% of resales in some areas.
More Foreclosures, More Declines...
Home prices can't bottom until foreclosures slow down. Since Alt A and prime foreclosures are just starting to rise, prices have a looong way to fall.
This is very true about foreclosures. On the Westside, foreclosures have already started hitting the condo market. SFRs have just begun to feel some pain and will intensify as Alt-A, IO, and ARMs start exploding this year. Unfortunately, these toxic loan products will take 2-3 years at least, to work through.
Westside RE is in for a hard painful look at reality and those who believe we are immune are delusional.
According to Moodys today, 12 out of 52 million mortgages (23%) are now underwater.
Govt still throwing money at the banks, as THE PROBLEM gets worse...
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