Wow, that's bad. My parents are now really stuck in their house. They should have sold and moved at least ten years ago.
I know I am going to sound like an evil person, but I have no pity on those who are in this situation. You don't buy something for hundreds of thousands (or millions?) of dollars without doing research on the cycles of real estate markets, costs of mortgages and so on.
People who just walk away because they are losing money are immoral. Years ago, my sister bought a condo on Long Island at the heart of the market and then had to relocate at the bottom of the market. She sold her condo at a $40,000 loss and bad luck.
My parents sold their house that they bought in the late 1960's for 25,000 for over 800,000 two years ago. Lucky them. THe longer you hold on to property, the more likely it is that you will gain a profit....and as my sister realized...she lived in her condo for five years. Even with the loss, she had to live somewhere. Could she have lived in an apartment for 8000K per year? Perhaps...
I work with a young overspender who bought a Mustang (without negotiating a deal...when I told him to do so, he said that he didn't want to look cheap or uncool) with a seven year loan....at some point, he will probably owe more on the loan than the car is worth.....and then he will probably complain as well.
I tend to agree with you about the insolvency point, Rhoda. I didn't buy an apartment when all my friends told me to buy because I knew I couldn't afford one.
But the broader disruptions to the overall economy that are resulting from the bubble burst are going to be breath-taking, and not in a good way. You can bet the economy is already in recession, more layoffs are coming, the credit markets are locked up, and states and municipalities are going to have a lot of trouble floating bonds at the same time that they're watching their tax receipts plummet. Add some scary public and private debt levels to the mix, $100 oil and other inflated commodities and a Federal Reserve that is fanning the flames of inflation by lowering interest rates even more and you're looking at some pretty scary times ahead.
I forgot to mention, the walking away phenomena is a result of the bankruptcy law changes that banks fought for and bought for themselves back in 2006. With consumers unable to do much about their credit card debt through bankruptcy anymore, many are choosing to continue to pay their revolving accounts while walking away from the home that they basically bought on 98%-100% credit.
Many people feel the pressure to own a home (or condo or coop) because of the perception to rent is a waste of money. In a sense, it is- I have always rented my apartment, and for my $1,400 a month, I have no equity. However, I do have a roof over my head, and the freedom to pick up and leave pretty much whenever I want. And while equity is indeed a good thing, so is not being "house poor"- I truly don't see the joy in owning something that is such a financial drain that every other aspect of life is unaffordable. This is a big part of the problem, and to some extent, I have little sympathy for those who bought into the real estate market way over their heads.
I agree with all the above, more or less.
I think, when I bought my home, it was a little more than double my annual income. Now, though my income has doubled, it's about four times my annual income.
I know people who are "house poor," some of whom have lost their homes, and others on the verge. I really hope homes once again become affordable for real-live working people like 15 more years.
That bankruptcy bill is a doozy, written by the credit card industry. No more forgiveness for catastrophic medical emergencies, the no. 1 cause of bankruptcy in this country, and this country alone. Bill Clinton refused to sign it, but it came up again, and GW had no problem with it at all.
Lots of Dems voted yes on that bill and sent it to GWB to sign - including Joe Biden, Evan Bayh, Robert Byrd, Harry Reid, Tim Johnson, Herb Kohl, Mary Landrieu, Blanche Lincoln, Tom Carper, John Edwards and a few others.
Obama did NOT vote for it.
Hillary did not vote.
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