Mark Zandi, chief economist for Moody's Economy.com, said on Friday that one-tenth of all homeowners in the United States (nearly 8.8 million homeowners) hold mortgages that are larger than the value of their homes.As a result, many of these homeowners do not have an incentive to try and hold onto their homes and may eventually abandon their properties.
They call this "mailing in the keys" as homeowners simply walk away from their properties and mail the keys back to the bank.
Zandi also noted that a 20% decline in home values nation-wide is now a likelihood.
With new and existing home inventories at all-time highs already, a few million additional homes added to the inventory list will certainly not help the housing market or home prices. As it was, the last quarter of 2007 saw a record drop in home prices (the national median price drop of 5.8%, to $206,200 from $219,300, was the steepest ever recorded by the National Association of Realtors.)
Also on Friday, Tom Eggleston, head of C.P. Morgan Communities, one of the largest privately owned home builders in the United States, said he doesn't see the housing market hitting bottom until the middle of 2010 and even then, recovery will be slow and painful and take years.
Zandi thinks 2009 will be the bottom, but he has already revised his forecasts for home value declines and housing market bottoms before and with the U.S. economy teetering on the brink of a recession or already in one, who knows how bad things can get with real estate.
Of course here in Manhattan, residential real estate is still rising at a pretty good clip. The same goes for the trendier parts of Brooklyn. The rest of the boroughs and the surrounding suburbs have not proven to be immune from the effects of the housing bubble burst, however, and as I blogged in a post earlier in the week, commercial real estate in New York, even in Manhattan, looks to be in distress.
With many adjustable rate mortgage resets still to come this year and with mortgage rates actually rising despite the Federal Reserve's precipitous lowering of its benchmark interest rate, who knows when the market will hit bottom. An economy in recession could really exacerbate things.
Now if you don't have to sell your home and you can make your mortgage payment, then you can hold on and wait for values to rise again.
But if you can't make your payments or your have to relocate and sell your home, look out below.
And you can forget the program put together by the federal government and the banks to help distressed homeowners.
So far, it's all been p.r. and not much else.
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