by Patrick Appel
A reader writes:
I think a big part of the equation that is being missed is those owners that cannot sell. For them it’s not that they “are convinced that their homes are worth lots of money, or will rise in price…”, but that they are so far upside down on their mortgage that they cannot afford to sell. We are one of those owners. Trust me, I would love to get out from under the condo we own in the Bay Area. Unfortunately, we are 25% upside down on the mortgage we bought in 2006 and we are too responsible to have received any assistance either from the government or from the bailed out bank that holds our mortgage. We have no option other than to hold on and hold out for as long as it takes for us to be able to save up and pay our way out or have the value of our home increase back to the mortgage value (and this could be 20 years). I don’t know how prevalent this situation is, but I’m guessing a lot more than people think and until it is addressed I don’t think our economy can fully recover.
Felix Salmon thinks housing prices will fall farther.