Real Estate In DEEP Trouble as Billions in Mortgage Debt in Crisis Zone
As real estate prices decline, borrowers who have taken on too much debt to purchase their homes may find themselves in a difficult financial position. If the value of their home falls below the amount they owe on their mortgage, they may be underwater on their mortgage, meaning they owe more on the mortgage than the home is worth. This can make it difficult for them to sell the home or refinance the mortgage, as they would still owe money even if they were to sell the property for its current market value.
Home flippers, who are investors who buy properties with the intention of quickly reselling them at a profit, may also be negatively affected by declining real estate prices. If the value of the property they have purchased falls before they are able to resell it, they may end up losing money on the investment.
One example of when people took on too much debt in real estate and ended up in a bad position is the housing market crash of the late 2000s, also known as the subprime mortgage crisis. During this time, many borrowers took out risky subprime mortgages with adjustable rates and little documentation requirements, and many were unable to make the higher payments when the rates reset. This, along with other factors such as overbuilding and risky lending practices, contributed to a steep decline in housing prices, and many borrowers found themselves underwater on their mortgages or facing foreclosure.
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Real Estate Cheap Money 0:00
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