shrinkermd: “It would seem resonable that house prices would correct to 2002 levels (adjusted for inflation). If so, there will be many, many homes that have larger mortgages than their real value.”
The real value is whatever the market will pay. However, buyers who bought responsibly and who don’t need to move within a couple years can probably ride this out. So long as the payments are affordable, they can survive. Speculators, on the other hand, are likely going to suffer.
“Speculators, on the other hand, are likely going to suffer.”
And they’re going to make the rest of us hurt in the process. Not as bad, but we will feel it.
“The real value is whatever the market will pay. “
With the liquidity squeeze, demand decreases dramatically, which means dramatic price drops.
Where will the new confidence equilibrium stabilize?
That home, $500,000 in 2007 was worth $20,000 in gold in 1913.
Buy stock in TUMS.
The problem is the real estate market isn't very liquid in the best of times, especially when compared to the stock market, and now it's ridiculous.
Speculators and many non-speculators have already been clobbered. What we're seeing now is collateral damage.
I agree that those who bought responsibly (i.e., who can afford their payments, regardless that they are upside-down) can survive. But I’m wondering what the impact would be of many homeowners, essentially, being unable to sell their homes should they want to (unable because they can’t come up with the cash to pay off their upside down mortgage).
I haven’t seen an economist address this yet. Does millions of folks “staying put” = stability or stagnation? How much loss of economic activity would it cause if millions of people who might have bought and sold a few more properties over the years never do?
The market is not clearing. Sellers are piling up and buyers are not taking their offered houses off the market.
Which is as clear as it gets before they actually fall, that prices will fall.
exactly. Unless you intend to move, the market price of your house is irrelevant. The only thing that matters is if you can afford the note.