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Tuesday, November 03, 2009

Homeownership can be a Nightmare

by Calculated Risk on 11/03/2009 10:23:00 AM

From Bloomberg: Real Estate Price Plunge Makes U.S. Homeownership Perilous Path

Kajal and Vishal Dharod paid $559,000 in 2006 for a new four-bedroom house built in Rancho Cucamonga, California. Today, it’s worth about $360,000.

“We don’t know how we can come back from a loss like that,” said Kajal Dharod, 29, a first-time homeowner with a $4,200-a-month mortgage. “Buying the house was a mistake.”

American homeownership, once considered a path to wealth, is now leading to disillusionment.
I know people who lost money in the early '80s housing bust in California, and they refused to buy again for many years. The same thing will happen this time.

Of course many homeowners are still stuck in their upside down homes, see: More walk away from homes, mortgages (ht Keith, Tim)
"It's increasingly a more important factor driving the foreclosure crisis," says Mark Zandi, of Moody's "As we move forward, the job market will stabilize, and the big thing will be strategic defaults. People are going to determine it doesn't make financial sense to hold on to their homes. That's going to be a significant problem. Strategic defaults mean foreclosures could be high for a long time."
Enticing people to buy before they are ready leads to a nightmare, not a dream.