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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (25583)	12/2/2004 6:48:46 PM
From: Elroy Jetson	Respond to of 306849

In California I see most home owners, with a mortgage, have home equity which is less than one years appreciation on average. Until interest rates rise there seems to be few who are not serial re-financers. I think it's safe to say that, like 1990, those areas of the nation which have experienced great appreciation will see most homes quickly underwater on their mortgages. It is interesting that, like Japan, most chose to continue paying their mortgage unless they experienced a change in status such as a loss of job, illness, divorce or job transfer. Without knowing the actual data, which we don't have, I think my calculations showing 23.3% equity among those with a mortgage are likely to be very close to the true figure. The cap on mortgage tax deductions above one million dollars if anything heavily skews the bulk of mortgages toward smaller homes which would drive the equity percentage lower than 23.3% rather than higher. In the area of California where I grew up, Orinda and Lafayette, there are the average homes around $800k and the nice homes which start close to two million and go up from there. Very few of the owners of the "nice homes" have a mortgage of any size. Most of the debt is against their business. Quite apart from the tax deduction, most people who have established their security, or inherited it, are very reluctant to bet their house. If a really bad economic times come they can send their business through bankruptcy and give their investment properties back to the bank, but very few want to lose the family home - that's for strivers who haven't yet achieved financial stability and for and gamblers like Donald Trump who like the rollercoaster thrill of the ride.