Understanding Financial Housing Crisis
Typically anyone who holds title to a home is considered to be a homeowner even if they have zero or negative equity in the home
. By this imprecise definition of home ownership, the percentage of Americans who own their own home has been above 60% for the past half century. Many, have even purchased second homes to use as home vacation rentals
Present mortgage crisis was contributed by the incentive for home ownership is inclusion of interest on home equity lines of credit (HELOC) whether the money borrowed is used for the purchase or improvement of a personal residence. Ironically this generous interpretation which encouraged homeowners to use Home Equity Lines of Credit (HELOC) to buy all sorts of things they otherwise could not afford
Second mortgages is the reason why manu homeowners are only in a negative equity position . If one in four borrowers is underwater on their mortgage, it is expected a stretch to admit them as homeowners. Not only do they not have any equity in their home, they owe more than it is worth. It is estimated that 5.3 million U.S. households have negative equity exceeding 20% of their home's present value. Vacation Rentals By owner are yet more profitable given they get a rent from travelers.
It would be inaccurate and deceptive to imply that the absolute majority of these homeowners are in a negative equity position due to the combined debt from the first mortgage and subsequent HELOC. Many of them made down payments as high as 20% and do not have a HELOC yet they have lost their cash equity and more due to the bursting of the housing bubble. It is not uncommon in some markets to find current values less than 50% of the value at the peak of the housing market only 3 or 4 years ago.. This is the main reason Europeans are buying vrbo vacation rentals as investment
Owning your own home is widely considered the fulfillment of the American Dream. Yet, according to The Joint Center for Housing Studies of Harvard University, "In any given year, some 34 million US households make their homes in rental housing. Like the general population, renters are highly assorted in demographic and income terms, as well as in their reasons for residing where they do."
The flood of foreclosures and short sales is plenty evidence that millions of Americans who bought homes over the past 5 to 10 years might well have investigated their options a little more cautiously before taking on more than discernment would have specify. There are really three questions here as an alternative of one. Buying may have many advantages over renting and still not be the right decision for you at this time. Moreover, this may be a avid time for you to buy a home, yet if you make the wrong decision about how much to spend on a home or where you buy, you may still find that you made a fault. I am not implying that all homeowners who are cladding a loss they will repent for years should have known better. They got caught in the perfect storm when the virtual collapse of the global financial system and the collapse of the overheated housing market occurred at the worst possible time for them.
With the benefit of hindsight many of those who have lost everything are blaming themselves for making bad decisions either about whether to buy, how much they could afford to pay, and the type of loan they signed. In some cases these homeowners listened to the wrong advisors or perhaps they refused to take the advice they were given. Even cautious buyers with fixed rate loans have been affected.
by: Emma Watson.
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