Check out this silly news from MSN Money:
MSN Money – The negative equity epidemic
* Nearly one in 10 households with a mortgage had zero or negative equity in their homes as of September 2005, according to First American Real Estate Solutions, an arm of title-insurance company First American Corp. The study of 26 million homes in 36 states and the District of Columbia found that one in 20 home borrowers was upside-down by 10% or more.
* The situation is even grimmer for recent borrowers. Of those who bought or refinanced homes in 2005, 29% had zero or negative equity, and 15.2% were underwater by 10% or more.
* Interest rates on about a quarter of all mortgage loans outstanding, or $2 trillion, are scheduled to reset this year and next, according to Economy.com. Homeowners who opted for extremely low teaser rates in recent years could see their payments eventually double, said Christopher Cagan, First American’s director of research and analytics.
* Defaults and foreclosures are already on the rise, thanks in part to higher interest rates, cooling real-estate markets and overextended borrowers. Nationally, 117,259 properties entered some stage of foreclosure in February, according to foreclosure-monitoring firm RealtyTrac, a figure that’s up 68% from February 2005.
Here’s the kicker though:
A 1% teaser rate on a $300,000 mortgage that rose to a market rate of 6%, for example, would increase a family’s monthly payment by 86%, from $965 to $1,799 a month. If the old payment represented 30% of a family’s gross income, the new payment would represent over 55% — a squeeze that few families could endure for long, Cagan said.
Isn’t most of Silicon Valley paying close to 50% of their gross income already? Bah. This is totally doable.