Thursday, November 29, 2007

If you bought your house since 2000, you likely...

...didn't have a 20% down payment, or even a %10 one, and now have negative equity. That means if you had to sell your house today, in all likelihood, in most US market areas, you would not be able to sell your house for enough money to cover your old mortgage.

Home prices: Worst drop since '70
New home prices were down 13% in October, yet sales pace still falls well short of forecasts. August and September sales reading cut.
By Chris Isidore, CNNMoney.com senior writer
November 29 2007: 3:55 PM EST

NEW YORK (CNNMoney.com) -- The biggest plunge in new home prices in 37 years was not enough to revive October sales, according to the government's latest reading on the battered housing and home building markets...

...Also depressing sales and prices was a record 191,000 completed new homes on the market that have not yet been sold.

The report showed that the median price of a new home sold in October plunged 13 percent from year-earlier levels to $217,800. It was the most severe year-over-year drop since September 1970, when the median price was only $22,600, or less than the cost of a typical new car purchase today.

And the price figure may actually be underestimating how the bottom has fallen out of prices in recent months. Most builders are trying to support prices by offering to cover closing costs or by adding free features on new homes...

...Thursday's report is only the latest sign of weakness in the housing market. On Wednesday, a separate report by the National Association of Realtors reported the weakest sales of existing homes on record, despite the largest drop in prices ever...

Foreclosure's other victims - those left behind
When every second house sits vacant, home values plummet and neighborhoods deteriorate.
By Les Christie, CNNMoney.com staff writer
November 28 2007: 3:13 PM EST

...Many of the owners left behind live near abandoned houses that shelter squatters and worse. Crime has soared and owners would leave, if they could, but their homes have plunged in value. Leaving would mean starting from scratch...

..."The vacant houses have reduced the value of my home," said Anderson. "Even if you want to, it's hard to move," she said...

...It's already too late to rehabilitate many of the empty houses. Most of the ones stripped of aluminum siding and copper piping and wiring are too damaged...

..."I can't tell you what it does to your spirit," Anderson said. "You look at the abandoned houses and it really dampens you."


In a slow and painful attrition, this situation is spreading across America. The neighborhood described in this article has carbon copies in the major metropolitan areas and their bedroom communities all across the country.

Your financial future depends on realistically assessing what the true value of your home will be in 5, 10, 15 or 20 years, and many people who bought in the last 7 years are still thinking their house is worth what they bought it. People who bought prior to that may be counting on increases in equity that have in fact vanished into the thin air from which they were created. People who bought more than 15 or 20 years ago may be counting on getting a certain value for their retirement from their home equity or from selling their home, and that value may now be greatly overestimated.

This is the reality that we live in, class - and in order to prepare for the future, we need to understand what is happening now, and how long it might take the market to recover from this fiasco, if it ever does.

Be smart. Plan wisely. And don't even think about treating your house like an ATM machine - it isn't one.

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