Why So Many People Are Facing Foreclosure
Posted on 22. Dec, 2008 by admin in Property
In the current financial crisis, more people have lost their homes due to foreclosures than ever before in history. For homeowners, this is an absolutely awful thing to have happen, especially in the wake of a substantial rise in unemployment over recent times. Unfortunately, we are almost at the point where someone knows a friend, colleague, or acquaintance who has fallen victim to foreclosure in the current crisis period. But, even though so many foreclosures are happening, most of us are still quite unfamiliar with the economics behind it. Let’s take a quick look at why so many people are facing foreclosure on their homes.
It all starts with the dramatic fall in house prices. Over the last year and a half, prices for homes in some regions of the country have fallen by 30 to 50 percent or more! That is a huge hit in equity values. So much so, that when people have a mortgage of $500,000 and their house is now valued at just $320,000 - it’s almost not even worth paying the mortgage any more. With this fall, and job losses abound, people have defaulted on their mounting mortgages, and hence the ultimate result is a rise in foreclosure numbers.