What story broke yesterday and continues to dominate the business press today? Begin by asking yourself which feature adds the most value to a piece of rural or recreational land. As we all know the answer is almost always water. Unfortunately that same valuation strategy doesn’t hold for residential properties, as the Wall Street Journal pointed out in this article titled “Housing Pain Gauge: Nearly 1 in 6 Owners ‘Under Water.'”
I saw the story bright and early when I scanned the print version of the Journal. Not surprisingly, it singled out the usual suspects: Las Vegas, Los Angeles, Phoenix, and Miami. In the bloodbath since the housing bubble burst, home prices in those markets have fallen as much as 31 percent. Forget 0 percent down. Even with traditional financing of 20 percent down numbers like these take a toll. Then I came across another angle on this dire example of home economics courtesy of Brian Sullivan’s blog. The Fox Business anchor, whose show I visited in October, tied the homeowners’ plight to the $300 billion bailout that Senator McCain proposed during Tuesday night’s debate. Last but not least, I noticed the story on the Journal’s website yet again this morning. The article has been and is the newspaper’s most popular read. For that matter it is also the most emailed story as well.
With an estimated 12 million homeowners owing more than their home is worth, it should be clear to all of us that we are far from out of the woods in this crisis.
P.S. Someone kindly inform the Journal’s talented writers that American homeowners don’t owe a dime on their mortgages. To say so is to misuse a common business term. Anyone who has financed a house knows that a mortgage is not a loan. It is the legal instrument a homeowner uses to pledge his/her/their property as collateral for a loan. Homeowners give mortgages. Lenders write loans. Or at least they used to.