Negative equity

[morganist]

I was just thinking in the early nineties there was a negative equity trap. People bought houses and the price went down. The mortgate was worth more than the house and people had to pay the mortgage off because they had a contract. The same situation exists today where people have paid enormous amounts for their house and are locked into a mortgage. If the house prices fall, which they will, unlike the nineties when the market recovered quickly it could be a situation where people end up owing a mortgage on a property that is worth far less for their whole life.

I was wondering if any of you had an opinion on this. Do you think it is likely?

 

[nazzdack]

Quote from morganist:
----negative equity trap.
----situation exists today....
----Do you think it is likely?

1) Dude, you were around from 2007 until yesterday, weren't you?
2) Do you live outside the USA?

 

[morganist]

Quote from nazzdack:

1) Dude, you were around from 2007 until yesterday, weren't you?
2) Do you live outside the USA?

I live in the UK. The property crash is yet to happen. And the prices are the most overpriced in the world.

 

[etile]

Quote from morganist:

I was just thinking in the early nineties there was a negative equity trap. People bought houses and the price went down. The mortgate was worth more than the house and people had to pay the mortgage off because they had a contract. The same situation exists today where people have paid enormous amounts for their house and are locked into a mortgage. If the house prices fall, which they will, unlike the nineties when the market recovered quickly it could be a situation where people end up owing a mortgage on a property that is worth far less for their whole life.

I was wondering if any of you had an opinion on this. Do you think it is likely?

non-recourse loans. walk away.

 

[nazzdack]

Quote from morganist:
----UK.
----The property crash is yet to happen.
----most overpriced in the world.

1) Okay.
2) Were there certain price segments in the market that declined?
3) There must be a massive construction boom taking place that will satiate the market to bring about the eventual/expected/certain collapse of the market. Britain will go back to being a nation of renters. :eek:

 

[jlancaster]

Quote from morganist:

If the house prices fall, which they will, unlike the nineties when the market recovered quickly it could be a situation where people end up owing a mortgage on a property that is worth far less for their whole life.

As unfair and bitterly cruel this is, it's true. You've nailed it. Be careful when you buy a house.

 

[rallydog]

Two words; strategic default.

 

[morganist]

Quote from rallydog:

Two words; strategic default.

I don't know if you can do that in the UK without going bankrupt. Also with the amount of debt in the UK if everyone went bankrupt a whole generation would lose their pension.

The UK property market is super inflated and a lot of people have their future pension in it. They plan to sell it and live of the money. If the crash happens they will no longer be able to do this.

I don't think people will be able to walk away from the debt like in other countries. I think it will be held over them for the rest of their life.