Leave it to CoreLogic to make us feel even more distressed about the national economy. The real estae data firm regulary tells us just how many homeowners are underwater on their mortgage loans. Now CoreLogic is reporting that all those homeowners with second mortgage loans are pretty much financially doomed.
A recent story in the Wall Street Journal summed it up nicely: According to CoreLogic’s most recent numbers, almost 40 percent of homeowners who took out second mortgage loans are underwater, meaning that they owe more on their mortgage loans than what their residences are worth.
Homeowners with second mortgages, in fact, are two times as likely to be underwater as are those who only have primary mortgage loans. Only 18 percent of these homeowners are underwater.
Of course, the proliferation of second mortgages could be seen as just one more example of the greed that many say has sunk the housing industry. Many homeowners grabbed second mortgage loans as way to pay for such frivolities as vacations, home electronics, new cars or new furniture sets.
But that’s not the whole story. Many other homeowners used the money from their second mortgage loans to pay for far more important items, everything from their children’s college tuitions to their medical bills.
Let’s be honest here: Life in the United States is expensive. College tuition is getting more unaffordable by the year. Medical costs continue to skyrocket. It even costs a small fortune to fill your car’s gas tank.
It’s hard to blame homeowners for grabbing at the only wealth they had during the go-go housing years, the equity in their homes.
The real fear now is that the nation’s housing market won’t return to stability for a long, long time. Think tank Capital Economics recently gave its opinion that the the current housing price collapse is worse than what the country saw during the Great Depression. That’s awfully grim news considering that housing values took 19 years to fully stabilize from the beating it took during the Great Depression.
If you’re not good at math, here’s what that means: If it takes our housing market 19 years to recover, that means housing prices — if you consider now to be the official low point — won’t stabilize again until 2030.
— Dan Rafter