When you read something like this:
March 4 (Bloomberg) -- More than 8.3 million U.S. mortgage holders owed more on their loans in the fourth quarter than their property was worth as the recession cut home values by $2.4 trillion last year, First American CoreLogic said.
An additional 2.2 million borrowers will be underwater if home prices decline another 5 percent, First American, a Santa Ana, California-based seller of mortgage and economic data, said in a report today. Households with negative equity or near it account for a quarter of all mortgage holders.
“We have way too much supply and not enough demand,” Sam Khater, senior economist for First American, said in an interview. “People aren’t going to purchase a home as long as prices keep falling, and someone who is worried about their job isn’t going to purchase a home either.
The questions to ask are this:
- Was the home purchased at the height of the housing boom? If so, tough luck.
- Is a re-financed mortgage with a "cash out" option the reason? "Cash out" options mean you get a lump sum of money out of the re-finance of the mortgage to spend as you wish. People use this option to fix up the home, buy cars, finance college, take vacations, pay bills, etc. If so, tough luck.
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