Lack of Equity, Rising Rates Will Leave Many Homeowners Stranded
Lack of Equity, Rising Rates Will Leave Many Homeowners Stranded Apr 19, 2006 - Linknet Real Estate - According to many, the Real Estate bubble of the last four years is certain to go pop over the next year or so. Yes, there already has been a slowing of sales, and increase in inventory, both of which correspond to the gradual increase in interest rates.== Commercial Real Estate without Banks | Real estate investing made easy == But the real sleeper is the number of first time home buyers who are over-leveraged at extremely low "teaser" rates, and whose mortgages are due to be renewed in the next 12-24 months. Here are some sobering statistics recently highlighted by MSN Money Central - Nearly 10% of Us households with a mortgage had zero or negative equity in their homes as of September 2005. - 5% of home borrowers were in negative equity by 10% or more. - Of those who bought or refinanced their homes in 2005, 29% had zero or negative equity, and 15.2% were in the red by 10% or more. - About 25% of all mortgage loans outstanding -- trillion -- are scheduled to be renewed at higher interest rates this year and next. Homeowners who went for low teaser rates could be facing a doubling of their payments. - In the U.S., 117,259 properties were in some stage of foreclosure in February, up 68% from a year earlier. - 43 percent of first-time home buyers made no down payment last year in 2005! - Of borrowers with initial interest payments of 2.5 percent or less 22% have negative equity and 40 percent have less than 10 percent equity. Does this sound like a disaster waiting to happen? Yes it does, and you can be sure that it is the greedy banks and mortgage companies who are the worst culprits -- and ultimately the ones likely to be hurt the least.
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