A startling article in the Wall Street Journal reports that nearly one out of every six homeowners in the US owe more on their home than the house is worth. One in six!
Now this doesn't mean that one in six homeowners is facing foreclosure because most can probably still afford to make their payments, but it is still shocking to think that values have fallen so quickly that one in six people owe more than their house is worth. Prices in the Boston area are now back to 2003 levels.
The article points out that only 4 percent of homeowners were underwater in 2006 and even though the 2007 number rose to 6 percent, the 2008 figure is staggeringly high at almost 16 percent. And for those people who bought their homes within the past five years, 29 percent now owe more than their homes are worth.
In other disppointing news, 9 percent of the mortgages on 1-4 family homes were a month or more overdue or in foreclosure and that is the highest percentage recorded since the Mortgage Bankers Association began tracking this figure 39 years ago.
Virtually the only piece of good news was that declines in home prices have now made homes more affordable. In the second quarter of this year, the median home price in the US was 1.9 times the average pre-tax household income and that ratio is very close to the 1.87 times income rate that was in effect for 1985 through 2000.
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