What would you do if you lost your home equity?
How would you feel if you had an extra $50,000-$100,000 in liquid cash just in case you lost your job, or became disabled?
What if there was a way to participate in the upside of the housing market, and never lose your home’s value?
What if you could also participate in the upside of the stock market, but never lose your account’s value?
Who do you have in your corner protecting you from these losses?
Housing Meltdown
Why home prices could drop 25% more on average before the market finally hits bottomSo, you think the housing bust is bad? Prepare for worse to come. BusinessWeek says national home prices could plummet an additional 25% over the next two or three years. The charts and tables on the following slides tell the story of why prices could fall so much and what the fallout might be.
Room to Fall
Starting in 2000, home prices soared far above their long-term trend. They've only just started to return to normal. This chart shows the history of home prices adjusted for inflation going back to 1890, compiled by Yale University economist Robert Shiller. The black line is BusinessWeek's calculation of the long-term trend growth rate: just 0.4% a year after inflation. Coast To Coast
A 20% decline in home prices would wipe out all of the home equity of two-thirds of all people who bought houses in the last year, Zillow.com estimates. The bars show the percentage of recent buyers in each market whose home equity would be wiped out by a further 20% price decline.
Optimism
These regional pie charts show the results of a December survey of 1,509 homeowners asking whether they thought their home's value had risen or fallen over the past year. The survey was conducted by Harris Interactive for Zillow.com. Beneath each pie chart is Zillow.com's estimate of the actual change in house prices for the region over the past year.
A 20% decline in home prices would wipe out all of the home equity of two-thirds of all people who bought houses in the last year, Zillow.com estimates. The bars show the percentage of recent buyers in each market whose home equity would be wiped out by a further 20% price decline.
Optimism
These regional pie charts show the results of a December survey of 1,509 homeowners asking whether they thought their home's value had risen or fallen over the past year. The survey was conducted by Harris Interactive for Zillow.com. Beneath each pie chart is Zillow.com's estimate of the actual change in house prices for the region over the past year.Why Housing Prices Won’t Plunge ... And Why They Will
In the war of words over the outlook for housing, both the optimists and the pessimists have plenty of ammunition. If home prices really fall an additional 25%, Washington's rescue program is likely to seem seriously inadequate. So far the Bush Administration is pushing two main ideas: FHASecure, which offers new mortgages to certain well-qualified borrowers, and Hope Now, a private-sector program to streamline the modification of unaffordable loans. But FHASecure isn't open to people who are underwater on their mortgages—in other words, those who most need help. And the Hope Now alliance doesn't seem to be coping successfully with the mounting backlog of loan delinquencies. The other big Washington initiative, to crack down on loose lending practices, could be ineffective and even counterproductive, because it's making loan funding less available right when it's needed most.
In the war of words over the outlook for housing, both the optimists and the pessimists have plenty of ammunition. If home prices really fall an additional 25%, Washington's rescue program is likely to seem seriously inadequate. So far the Bush Administration is pushing two main ideas: FHASecure, which offers new mortgages to certain well-qualified borrowers, and Hope Now, a private-sector program to streamline the modification of unaffordable loans. But FHASecure isn't open to people who are underwater on their mortgages—in other words, those who most need help. And the Hope Now alliance doesn't seem to be coping successfully with the mounting backlog of loan delinquencies. The other big Washington initiative, to crack down on loose lending practices, could be ineffective and even counterproductive, because it's making loan funding less available right when it's needed most.
The next big reform ideas may hark back to President Franklin D. Roosevelt. Many of the housing market's props today—including Fannie Mae and the Federal Housing Administration—were launched during the 1930s. If things get bad enough, say some analysts, it could raise interest in renewing another innovation of the Depression years, the Home Owners' Loan Corp., which lent money directly to hard-pressed borrowers to prevent foreclosure. If enough banks get into trouble, Congress might even create something roughly parallel to the 1980s-era Resolution Trust Corp., which cleared up the savings and loan crisis by shutting down weak thrifts, thus wiping out the investments of the owners, and then selling off their assets to the highest bidders. And with homeownership no longer seeming like such a sure thing, national housing policy could become more evenhanded toward renters. Congress is weighing the creation of a National Affordable Housing Trust Fund that would build, rehabilitate, and preserve 1.5 million units of housing for the lowest-income families over the next 10 years. The national homeownership rate has already fallen about one percentage point from its peak, to 68.2% in last year's third quarter. However things unfold, the changes are likely to be wrenching. The bigger the boom, the harder the fall.
Checklist For A Housing Bust
Okay, you're convinced that tough times are ahead for housing. What should you do? Here are some ideas that could ease the pain.
· re-position your home equity now, while you can, in a safe, liquid, side fund!!
· equity management could increase your net spendable income by as much as 50%
Call us now @ 512-864-7979 to learn how!!!
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