What does it mean when the “American Dream” of home ownership becomes the “American Nightmare”?
What effect will the bank bail out have on Short Sales? This graph estimates that by the end of the year, 15,000,000 Americans will be upside down/ have negative equity in their homes. It also estimates that a very real potential 23,500,000 Americans will eventually become upside down in their homes if the true peak to trough decline reaches 35%. This is a very realistic probability.
Not every homeowner with negative equity will default, in fact many of these homeowners will only be underwater by a few percent. But if we estimate one half of homeowners with negative equity will eventually default, use a 50% loss severity, and a 35% price decline (23.6 million households with negative equity), and use the median house price from the Census Bureau of $216 thousand, we get $1.3 trillion in mortgage losses for lenders.
We have been predicting that real estate short sales would become faster and more streamlined as the housing crisis because a full fledged housing crash. Now that the global economy is under attact we expect to see our prediction coming to reality over the next 90 days. Fellow agents, get ready….take as many short sale listings as you can. The only way to slow the tsunami of foreclosures is short sales and…the goverment knows this.
(Source of graph: Calculated Risk)
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