[CitizensTruth] Sub-prime crisis: Property crash pushes third of US homebuyers into negative equity

[Daniel Stafford]

http://www.guardian.co.uk/business/2008/aug/14/subprimecrisis.housingmarket?gusrc=rss&feed=worldnews


  Sub-prime crisis: Property crash pushes third of US homebuyers into
  negative equity

    * Andrew Clark <http://www.guardian.co.uk/profile/andrewclark> in
      New York
    * The Guardian <http://www.guardian.co.uk/theguardian>,
    * Thursday August 14 2008
    * Article history

The US property market has collapsed with such ferocity that almost a 
third of homebuyers are trapped in negative equity with mortgages 
outstripping the value of their homes.

House prices in the US are plunging at their fastest rate for 12 years, 
leaving millions of people struggling to meet home loans often provided 
by unscrupulous lenders after making minimal checks on the suitability 
of borrowers.

Among Americans who bought homes since the beginning of 2003, some 29.1% 
are in negative equity according to research by Zillow.com, an online 
specialist in house values. For those who bought in 2006, as many as 45% 
have mortgages under water in comparison to the sale value of their 
property.

"For homeowners who need to sell, this is a gravely serious situation," 
Stan Humphries, Zillow's vice-president of analytics, told Bloomberg News.

"It can also be harmful to communities where the number of unsold homes 
adds more houses to inventory and puts downward pressure on prices."

The latest figures on house prices showed a year on year drop of 9.9%.

Worst hit are previously booming areas such as Los Angeles, where prices 
are down 27%, and Las Vegas, which has seen a drop of 21%.

Citigroup's housebuilding analyst, Josh Levin, yesterday predicted that 
property prices could continue falling through 2010 and possibly 2011.

One of America's largest mortgage finance companies recently forecast 
that prices would drop by between 18% and 20% from "peak to trough" in 
the current downturn.

Freddie Mac said the US property market was in its most dismal condition 
since the great depression of the 1930s.


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