Deb, I was wrong, it was 16 or 17%.
http://www.npr.org/templates/story/story.php?storyId=121907594&surl=http://www.mpbn.net/&f=module-nprnews
moneywatch
Housing costs have been vastly inflated for years.
The 2004 hurricane season was actually one of the main causes, then the 2005 season increased them even more. All the fires and floods in California contributed to rising costs on the West Coast.
The reason for this is because there were so many incredibly destructive hurricanes...housing materials skyrocketed.
At that time ...I was the primary list agent for a condo complex. During the 2004 season, materials became scarce so the costs increased. They did not go down when supplies increased.
Because of the increase of materials for new housing...resale pricing also increased
because the market allowed it. Banks were lending "easy" money, low interest rates were still in effect and there were lots of buyers.
Then the 2005 hurricane season hit. Katrina, Rita, and Wilma hit all between July and early October. Then there were wicked floods in the NE, particularly in upstate NY.
At that time....the contractor on the site I was on...was only able to get material costs quoted for maximum 2 week periods. I'm talking roofing, lumber, plumbing materials....basic stuff. Housing costs for new construction continued to rise, and again the market never "righted" itself.
Banks were still lending at low interest rate...houses that had been one price in 2001-2003, early 2004 ...were now double and triple what they had been when purchased whether they were new or resales.
Contractors were increasing their building through the Carolinas, TN, up-state Georgia...for all those people leaving the Florida/MS/LA coastline. Nevada and Arizona were building for those escaping California fires and mudslides.
The people were migrating....only to find that the houses they left in those formerly "idyllic" spots ....wouldn't sell!!
They were in new - expensive....but hey, they cost less than the houses they left so why not have an extra mortgage for a month or two?
So...the homeowners in those states...kept lowering the prices of their homes. and lowering....and lowering.
Suddenly .... all those houses on the market, not only didn't have buyers for them....they were no longer even "worth" what they had been purchased for only a couple of years previously. This started to ripple throughout the country.
The mortgage crisis was the result and hit with a harsh "twack" between the eyes in October 2008.
Since then...houses have been steadily losing value throughout most of the country. Ironically....if said house burned to the ground...to replace it would be much more than the house could possibly sell for....because the materials costs have not decreased at the same, if any, rate.
There are people who have walked away from their mortgages....who are already into other houses.
But those who walk away....and do not have another house with a loan already in place....CANNOT get a new mortgage and won't be able to for many many years.
The only thing worse on a credit report than failing to pay a mortgage is failing to pay child support. Neither one will ever go away.
Many of those who walk away....flat out don't have a choice. They cannot sell their houses...because their mortgage note is much higher than what they can currently sell the house for, and they don't have any money to bring to the closing table in order to get out of the house. They will go rent some place BEFORE their credit report is trashed from failing to pay the mortgage, because if they wait until they are foreclosed....they will have a horrendous time trying to find someone who will rent to them with a mortgage failure on their credit report.
It's a vicious...vicious cycle that many people are caught up in.
They QUALIFIED to purchase these homes....at the price they paid for them....but due to many diverse circumstances ...they can no longer afford them....nor can they sell them and get the price they paid a couple of years ago....and the circle continues.
Until the banks/mortgage companies wake up and realize that in order to save the housing market...they are first going to have to save the EXISTING mortgages....we are not going to get out of the housing crisis.
The stimulus is great for these first time buyers, and now the one for subsequent buyers...however...these people are buying houses on the low end of the spectrum. These buyers are, for the most part, young people coming out apartments or momma/daddy's home.
The lower end of the market was the segment that was affected by bad loans...those given to people who barely qualified and were FHA loans for the most part. These are the same "type" of people who are being helped by the stimulus...young people who barely qualify, and are getting FHA loans. The ones who will still get into trouble if they have any significant changes to their lives...job loss, pregnancy/complications from pregnancy, divorce, called up to active duty from reserve duty. Anything that tilts the normal balance of their lives.
The middle and upper end market is still in distress and will continue to be until the banks/mortgage companies are forced to work with these homeowners. There are many many solutions for temporary or permanent fixes that the lenders are aware of...but hey, as long as they are able to make their bottom line look good, they have no reason to change....and right now, taking that difference between loan amount and foreclosure resale is helping out the bottom line.
It will take the government making a change on how a lender can deduct the default costs on taxes, for lenders to really start working with mortgage holders.
