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Young homeowners are drowning

By Judy Martel · Bankrate.com
Tuesday, August 28, 2012
Posted: 6 am ET

Although home prices have been rising and the housing market is slowly improving, one sector of the market still faces an uphill climb. Approximately half of homeowners younger than 40 are underwater on their mortgages.

Nationally, about a quarter of homeowners still owe more on their mortgage than their home is worth, but the rise in home prices is moving many into positive equity. Younger homeowners remain more at risk because generally they haven't been in their homes as long, leaving them less time to build up equity, according to a report from an online real estate marketplace.

Still, the report puts a positive spin on the matter by stating that since younger, underwater homeowners are more reluctant to sell, it creates a tighter inventory of homes on the market, according to Stan Humphries, the site's chief economist.  A smaller inventory of homes for sale leads to higher prices, which will further help the market recovery.

Two of the major metro areas hit hardest by the housing bust are recovering faster than other areas of the country, according to the report. Miami-Fort Lauderdale and Phoenix saw the largest declines in the number of homeowners who are underwater. Las Vegas is the city with the highest proportion of distressed borrowers. Almost 69 percent of homeowners were underwater in the second quarter.

Are you seeing home values rising in your neighborhood?

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21 Comments
George
September 01, 2012 at 3:10 am

The reason why history is studied is to learn the positives and negatives of the past and use that information to benefit us in the future. How soon we forget. NOTHING on this earth is forever. That includes people, places, and situations such as employment. The average American has replaced hard work, sacrifice, savings, simplified lifestyles, and family values with the search for easy money, lavish lifestyles & vacations, luxury autos, designer clothing, expensive electronics, etc. They feel as if it is their birth right. We lived in suburbia in the 1950's and my father rode public transportation to work because he didn't own a vehicle. He NEVER missed a mortgage payment. He burnt his mortgage in the early 1970's and still did not own a vehicle. He never owned a credit card and rarely purchased anything on time. He had a stress free family lifestyle, saved money, ate the best food and drank the best wine. Americans today do not want that lifestyle and when they get their rear ends in financial trouble they expect the Federal Government to bail them out. Americans have become as soft as oatmeal and whine about ever little issue. Remember that a contract is between 2 adult parties and each should do their homework prior to fixing a signature. Americans only have themselves to blame for their failures and until they are willing to admit it and make changes, they will always be doomed.

tramky
September 01, 2012 at 2:15 am

It has been my view that the mortgage-holder should have ALL bitten the bullet in 2008-2009 and taken the fat writeoffs then. The worlds of finance, employment, and credit changed dramatically--and so should the terms of mortgages. Modification of loans should have been almost automatic in those conditions, not left to the lenders & servicers to deal with one-at-a-time over 3 and 4 years.

When the lenders demand and accept home appraisals as part of the mortgage application, THAT is their moral input to the transaction, and they should ALSO accept the consequences of that appraisal becoming nothing more than a ridiculous piece of paper. Strategic foreclosures? You betcha! That mortgage contract is written by those companies, NOT by you, so it is presumably the way they want it. I went, in one year, from 45% equity in my house to an underwater mortgage. My $195,000 down payment has been completely lost and isn't coming back any time soon. I'm still making the payments but am decidedly not happy about doing so. No one has moved a muscle to bail me out of anything. But my mortgage lender & servicer was part of the Federal bailout using my tax money--well, rather the money paid for Federal treasuries by China.

Val
August 31, 2012 at 11:36 pm

Ed,
If you've worked every day of your life since 16 years old you sort of assume you will continue to be employed. You assume you will be able to pay your mortage. Yes, plenty of people bought more than they should have. Home prices were through the roof. I honestly thought that if I didn't buy, homes would climb out of my reach. It's funny. Now they are cheaper but my money,retirement job and credit are gone. I put $100K down on my home. It and my home are gone. With my new minimum wage job I can't even afford rent. I'm 51 and I rent a nasty room in a motel. Great time living within my means. I am not alone. Have some compassion for your fellow man Ed. So sorry your home value has gone down. You should be happy you still have one.

Cant Tell
August 31, 2012 at 9:54 pm

Ed, Have you ever heard of strategic foreclosure? Maybe you are the idiot for still paying for a home that is underwater. The CEO's of the banks love stupid people like yourself. You pay your payment out of guilt. These banks have taken Billions of tax payers dollars and have done nothing but place it in their pockets and go on lavish vacations. They don't care about you or what you think. They simply want you to continue to send your payment. Remember, they are the ones that invented the ARM out of greed. So, pull your head out and make better financial decisions.

dean
August 31, 2012 at 9:47 pm

I'm tired of hearing these people say its your fault. Ther are many people who did have great credit and a long history of great employment. But thanks to a president that ran our country into the ground and started wars and didn't pay for them, those same people are now unemployed and tryiny to start new careers and get back on track. The sad thing is ,a certain political party would rather take your home and deny you the chance to get back on track! Thank you Mr Bush for everything you've done!

Vick
August 31, 2012 at 8:49 pm

Noonie - I agree with you. It took my mortgage company almost 2 1/2 years to get this resolved and that's after I wrote to the President of the bank and finally contacted our state's attorney general's office. I turned in required paper work 8 times. In my case, it wasn't a matter of not making the payments. I fell behind due to going through cancer treatments (resulting in huge medical bills) and then my company closed leavng me unemployed. When I did get a job, after only 8 months off, our "fantastic" bank kept putting me off. Like Noonie, my credit score went down since every month the bank refused to process my paper work, refused my payments and generally took their sweet time. I kept fighting them for almost 3 years and they finally got my paper work processed but it was the worst experience of my life (and that's after cancer and unemployment) If I did my job as well as some of these banks do theirs, I would be out of a job. I have never heard of a place telling a customer that they are 10 - 12 months behind in processing papers.

noonie
August 31, 2012 at 7:37 pm

there are people out here going through a second chance when the mortgage companies hurried and foreclosed on properties erroneously; that thought great news. well guess what--- they're doing the same thing again the irony here is things didn't have to be that bad in my case if the mortgage companies had not dragged out the process for 4 years . things could of been resolved in 4 months---thats how long it took me to get back on track innitially,instead my credit report has been ruined i have to jump through hoops to qualify to keep my home of 22 years. and they are now about to sell my home at auction again. easy to sit back and blame others when you need to educate yourselves about the facts out here. don't look using tunnel vision. we didn't have an arm mortgage-----------hello

JimS
August 31, 2012 at 6:45 pm

There are a lot of heart-breaking stories out there -- consumers who bought a house that was realistic based on their finances, and then got caught in the economic down-draft. There are also plenty of villains, including the former Senate Banking Committe Chair (Barney Frank) who leaned on Fannie Mae and Freddie Mac to make mortgage loans that any sane banker would have avoided. My wife and I are in our 3rd house. Every time we've applied for a loan, even if we were just refinancing, every aspect of our financial status was scrutinized by the underwriter. I've even had to write an explanation about why I was late in paying a $.50 bill. So I can't muster a lot of sympathy for those particular buyers who were convinced that if they bought a house that was way beyond their means and could just keep up with the payments a couple of months, they could unload it at a big profit -- or their lenders who never bothered to check if the mortgagees had anywhere near the income or assets to keep up with those payments. I have diligently searched the Constitution and can find nothing in there guaranteeing that every citizen, no matter how shaky his finances, has the right to own a home.

Ed
August 31, 2012 at 6:20 pm

It makes me mad that people are just choosing to defualt on their loans/mortages. If you signed and said hey im gonna pay this you need to pay it. I understand when peoples income changes but you needed to understand that ARMs are the worst thing in the world. It's the gamble people play. One huge part of the downturn in the housing market is ARMs. They ha to have their dream home right now and didn't think for the future. It's a sad sad day when people play the victim and they don't even think about the impact they have on others. My house has dropped in value due to idiot defaulting on their loans, doing short sales and bank forclosures. If you agreed to pay you need to pay simple fact. Let the people start to bash.......

Pure and simple live with in your means dont go buy a your dream house, car, tv, if you can't afford it. Don't put everything on CC. Pay cash, pure and simple.