dfw.com
Les,
this is the big problem in today's market and why we could be looking a big crash.
Under any type of economic conditions, there are always some who for one reason or another run into financial difficulties and are forced to liquidate their homes.
If rates keep coming down, lowering the monthly payments could help some.
If the property values keep increase, simply selling and getting out will help others.
If none of the above, then we have a problem.
When Greenspan was asked a few months ago if we are in a real estate bubble, he said no and went on to explain that is because real estate is not liquid, therefore hard to have a bubble. That once again demonstrates Greenspan total lack of knowledge in real estate (actually in most matters).
Typically, what happens when a borrower/homeowner encounters financial difficulty, they drain savings. Then they make ends meet via credit cards or other forms of credit. Selling the home is usually, and wrongly, the final solution. By then, they could be 6+ months behind in payments, delinquent in taxes, sky high credit card debt ..... The lender has no choice but to foreclose.
How many unemployed workers in the US managed to hang on to their houses because of the rising equity in the past few years? Well, the music is about to end. There aren't gonna be enough chairs when the music stops. |
