span they owe more than the market
class="cap">I f you value of their homes.
bought a home in the last
If you are one of those people
five years there is a one out of looking at negative equity, but
three chance that you now owe you plan on living in your home
more on your mortgage loan than for the next 10 to 20 years, no
your home is worth. Yipes! Could problem. Inflation alone will
that possibly be true? save you.
That bad news comes from
The trouble starts if when of
Zillow.com. Zillow.com is the those homeowners find they must
online service that offers sell for some urgent reason. How
residential property valuations can you sell a home when you owe
based on tax assessments. The more on the mortgage than the
company reports that in 2008 2nd market value of the home?
quarter home prices fell by
Oh sure, for a while every
almost 10%. The crash in home owner hopes they can price their
values was the largest on a home at breakeven and find a
year-over-year basis in 12 years. buyer. The problem is that a
It brought the median home price breakeven price will be thousands
down to $206,919.
above the selling price of other
Here's the real shock in this homes in the neighborhood. Your
report. That drop put almost 30% chances of selling are about the
of the people who bought homes same as winning the lottery.
since 2002 into a negative equity
If you absolutely must sell
position!
you could bite the bullet and
Zillow.com says that the year keep the home as a rental
2006 was the very top of the real investment. But wait, there are
estate market. 45% of those who so many homes now on the rental
had the misfortune of buying in market that you will never be
that year are now underwater - able charge enough rent to cover
your monthly mortgage payment. They are receiving envelopes in
You will have what real estate the mail that contain the keys to
investors call an "alligator". the house rather than a check for
That's a property that will the mortgage payments. The keys
slowly devour your capital. jingle as the envelope is
If your income is high enough delivered.
you may be willing to feed your
Homeowners who can't make
alligator for a few months - come their mortgage payments face
out of pocket for the difference foreclosure. They can soften the
in rental income and mortgage blow some by offering their
payments. Your hope is that there mortgage lender a deed in lieu of
will be an increase in the market foreclosure. That saves the
value of you home during those lender the expense of a formal
months and you will be able to foreclosure. It is still a black
sell your home at an acceptable market on your credit history,
price.
but not quite as bad as a full
Oh my, you are now a landlord out foreclosure. Oh yes, not all
with all the associated problems. lenders will accept a deed in
If you have moved out of the area lieu of foreclosure.
you are an absentee landlord and
The bottom line? Thousands
that multiplies the problems. more vacant homes coming into the
Hire a property manager? That market and increased supply
simply increases your alligator's resulting in lower real estate
appetite.
prices for everyone.
Jingle Mail
What can we learn from all
That brings us to an expected this? Booms don't last forever
increase in "jingle mail". Jingle and the last ones to the party
mail is a phrase that has end up with the
recently been coined by companies mess.
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