Varegg wrote:
The specific problem is that the building of neighbourhoods is being sold on falsified loan papers where people get advised to invest in a new home in a certain area and this attracts a group of people that normally would have been more restrict about buying a new home in the first place.
They can afford the loan at first but then the mortgage gets more and more expensive until the point where they can afford it any longer and then have to sell it, then the spiral continues for the next one in the neighbourhood and the next and the next with lower and lower prices for the homes until most of them still owes money after the sale.
So far about 2,5 million Americans have walked into this trap !
Unless they opted for the ARM (Adjustable Rate Mortgage) when they purchased their home, the only reason their mortgage amount should change at all is due to taxes. And there is a Federal law that the taxes on a home can only increase by (I believe the number is) 10%.
We've seen the same thing here in San Antonio over the last few years. Builders are sticking to certain areas causing a boom in population, which means the school district then needs to build more facilities and hire more teachers, which in turn is handed down to us tax payers. (Not Bush's fault people want to live in my school district).
To alleviate the problems that are going on, Texas recently passed a law that high dollar homes, which in the past were way under-valued, must now reveal how much the home was sold for when buyers exchange hands. In other words, we have houses in my school district that were appraised at $250,000, but sold for $2,500,000. So the people living in that house were not paying their equal share of taxes. They are doing the with local businesses, they too have to reveal their actual value and pay taxes on that.
So this year, not only has the value of my house appreciated, we passed a school bond to pay for new buildings and my taxes still went down (happy, happy, joy, joy).
But back to the original topic... the problem with people keeping their homes also extends to purchases made after. Electric/gas/water, phone, I-net. Plus the furniture to fill the house, most probably purchased that on credit, and possibly a car or two. So the problems people are having are not in the house itself, but sometimes it comes in the cost of maintaining that home.