Wednesday, October 12, 2011

Those Who Will Never Buy Houses Again

Every foreclosure turns a homeowner back into a renter. How many of these people will never again attempt to buy a house?

In many states, recovery of an overpriced house by the bank does not satisfy the home loan. The difference between what the bank gets from reselling the property and the outstanding balance on the loan can be up to the borrower to repay. Even after having been evicted from their home, they often must pay this money, and all the while, interest is accumulating. (However, in Alaska, Arizona, Connecticut, Florida, Idaho, Minnesota, North Carolina, North Dakota, Texas and Utah, homeowners may be able to "walk away" successfully.)

Needless to say, these former homeowners who still must pay off their lender will be forever lost to the housing market. How dare they ever buy again?

Anywhere from 25% to 47% of the mortgages in Chicago are already "underwater". The owners owe more than the houses are worth. Even if times get better and they pay off their current mortgages, will these owners be likely to buy again? After having been trapped once, they will probably be wary of becoming ever again so trapped.

Eviction of illegal aliens leaves empty houses. Empty houses bring down neighboring home values and help drive their mortgages underwater. Foreclosures also produce empty houses, also bring down home values and help drive mortgages underwater. Each neighbor's foreclosure can reduce the value of your own home by $10,000, estimates a Wall Street Journal article.

The government uses the number of new home sales (which fell again last month) as a metric to measure our economic health. With owners rapidly turning into renters, the number of potential new home buyers may dwindle down to where this metric is meaningless.

The National Mortgage Bankers Association is now meeting in Chicago. Is there anything you would like to say to them?

Their number is 202-557-2700.

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