They thought it was just those bad sub prime loans that were a problem and they would soon be cleared away.
SURPRISE: Up to 30% of mortgage payments are in default in some areas, and these are mostly PRIME mortgages no longer immune to the crushing default trend.
In Addition:
As homes fall further underwater, (another 10 to 12 % fall this summer) many who have been paying on a dead investment (underwater) as the moral thing to do, will decide this is not going to get better and with a third of the mortgage underwater, no longer makes any sense to keep paying.
Despite many actually being able to pay, they too are going to simply "walk a way".
Drop off the keys or short sale.
Deciding, looking at these continued drops in value, further underwater, that this makes no sense to keep paying on something that is going to take up to ten years to even get back to even.
Besides, no more community moral restriction, everybody's doing it that has any business sense.
The lenders are starting to wake up to the huge dilemma in holding many of their foreclosed homes off the market, figuring the market was turning around and by holding on to them and selling later they would recoup more of their losses.
This huge number of "Shadow Homes" artificially held off the market by lenders will suddenly be also dumped when it appears the coming additional 10% drop is not the end, it is the start.
Up to 40% of the homes added to the already overburdened market in many areas are short sales and foreclosures.
We see figures that up to 32% of home owners say they would sell if they saw a rise in prices. (back log of people who would normally sold a home because of a job switch etc and have held off).
This means this is a huge stock of additional homes, MANY who need to sell are holding off selling because of the low prices, and price is not adequate to cover the mortgage liability.
When these prices now fall even further many are going to be forced to sell whether they want to or not.
These homes are not on the market to sell only if you get the dollars that you are needing to get. They are desperation, MUST SELL inventory
that will be lucky to get any offer, and lenders etc will forced to consider themselves indeed lucky to get an offer and be able to accept, of any amount.
How low did the one go across the street last month? This one will have to go for $10,000 less to have any chance of an offer, and so it goes lower and lower.
You have a rapidly accelerating down market that will feed on itself worsening through 2011.
