I don’t understand this “underwater” BS. Just about everytime you buy a car you are “underwater” as soon as you drive off the lot. As far as houses, most folks buy a house to live in not as an investment. When the house was purchased you agreed to a series of payments allowing you to live there. There is no guarantee the house will go up in value every year.
A lot of the housing communities that have been bulldozed and then rebuilt with 4 times the residency on them (by building vertically) have hyped up the “buy now” pressure but they offer nothing lasting to the buyer. The land is worth “more” because the developer says so.
But in 20 years, what’ll it be?
And just because the tax assessor says it is worth more is not based on what the market value actually is. It became a back door way for communities to raise homeowners taxes without increasing the tax rate.
I don’t understand this “underwater” BS. Just about everytime you buy a car you are “underwater” as soon as you drive off the lot. As far as houses, most folks buy a house to live in not as an investment. When the house was purchased you agreed to a series of payments allowing you to live there. There is no guarantee the house will go up in value every year.
I bet you also think its “great to Free Trade with Communist China....look at all the jobs we created!”
That is why car loans have different rules. The rules are designed around the scenario.
Also, with a car, you may be under water by a few months income. With a home you may be underwater several YEARS worth of income. The incentive is there to walk away and let your credit rating be trashed. Heck, I’d trash my credit score for a few hundered big ones in the bank. REAL money trumps “credit score” every time.
‘I don’t understand this “underwater” BS. Just about everytime you buy a car you are “underwater” as soon as you drive off the lo”
I live in Florida. Many homes in my area have dropped 30-50% in value. A few cases of homes which sold for $1.5 million in 2007 were recently sold for $400k.
The banks and mortgage companies who processed that sale in 2007 KNEW the property was overvalued and that the market would be declining. The appraisers worked at the direction of the bank.
Is it right to walk away from your mortgage. What most of the banks, mortgage companies, real estate companies, title companies, appraisers and so forth was not right.
Two wrongs don’t make a right but life isn’t simple. Sometimes there are no good answers once the hole has been dug.
The banks and the 2005 bankruptcy reform are set up on the notion that the house will not lose value. (not making more land, will not walk away from homestead)
We have a simple deal in these situations. You pay=you keep. You don’t pay=bank will take.
a deal is a deal so people are just giving the bank the keys.
The upside down part is why keep when you can surrender the house and buy the idential association house (never buy and HOA house in this market) across the street for 1/2 to 1/3.
Actually I’d disagree with you. A car is considered to be a consumable. It’s expected to depreciate in value and eventually go to zero worth. A house is not the same. Most people look at their house as an investment. Even if it does not go up in value they expect to be able to sell it for at least what they bought it for.
That’s the concept, anyway. But a lot of people bought thinking not just of the value of the house but of the amount of their income. They figured that they’d always keep their job and their salary would always go up every year. When they lost their job or had to take a pay cut and then saw that they’d never be able to sell their house for what they paid for it they figure “Why put money into something when I won’t get it back?” So they walk away from their house, pay the penalty, and start over. With prices as low as they are now they figure that they’re bound to be able to resell it for at least what they paid for it. That’s a much better place to put your money.