Real Estate values are based on previous sales in the area. If your neighbor falls victim to foreclosure, your property value decreases.
How to Dig Out When You are Underwater
As I look at the Real Estate market it is clear to me that it is unemployment that is driving the foreclosure market. As homeowners are unable to pay their mortgages and fall into default on the loan, the lender starts the foreclosing process. The home is either auctioned off at the court house for a low price or the bank will sell it as a “short sale”, meaning they will take less then is owed. OK, so far we’ve get the picture, what does that have to do with your home?
The value of Real Estate is based on previous sales in the area. If your neighbor happens to fall victim to foreclosure and their property sold at a very low price, guess what just happened to your property? It is now worth less because of that sale. It doesn’t take many of these short sales to bring the value of your property to an “underwater” level.
It’s like being on a merry go round that doesn’t stop, with each revolution we sink deeper and deeper. So what is the answer? First we have to stop the foreclosures. As long as foreclosures continue then the water above your head will get deeper. A complete restructure of the value of real estate would do the trick, if the banks would go along with it, which in my opinion they would not. Creating jobs and putting everyone to work so they can once again pay their mortgage payments, that is the best answer, but won’t happen for a long time to come, in my opinion. You see, it takes new business start ups and existing business expansion to create jobs. Main street has always been the heart and soul of employment, and always will be.
I wish I had an absolute answer, but I don’t. We are living in some very strange times and history is being made with each passing day. It’s sad to think our elected leaders can’t see the hand writing on the wall and figure out what you and I already know. Until that happens our homes will be worth a fraction of what we owe on them, until then… get a longer snorkel.
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The Feds are announcing a second wave of financial stimulus this afternoon. Expectations are in the neighborhood of $500 billion in total. Money for nothing creates inflation, that is inevitable, as it dilutes the purchasing power of the money you have in your pocket, in the bank, in stocks and in your property.
A teacher of mine once said, the value of your car is the money you’re going to get, if you have to sell it by 4 pm today. The same goes for homes. We’re going up a steep hill in time and better shift to first gear, rather than thinking we can make it in overdrive and on cruise control.