"...Her [Goodman's] truth begins with a shocking calculation: of the 55 million mortgages in America, more than 10 million are reasonably likely to default. That is a staggering number — and it is, in large part, because so many homes are worth so much less than the mortgage the homeowners are holding. That is, they’re underwater.
Her second calculation is that the supply of housing is going to drastically outstrip demand for the foreseeable future; she estimates that the glut of unneeded homes could get as high as 6.2 million over the next six years. The primary reason for this, she says, is that household formation has been very low in recent years, presumably because of the grim economy. (Young adults are living with their parents instead of moving into their own homes, etc.) What’s more, nearly 20 percent of current homeowners no longer qualify for a mortgage, as lending standards have tightened.
Nocera argues that we’re close to a “housing death spiral”: house prices fall –> more borrowers become underwater –> more defaults and foreclosures –> house prices fall further..."
at http://ftalphaville.ft.com/blog/2011/11/07/730891/sizing-the-mortgage-default-mess/
Her second calculation is that the supply of housing is going to drastically outstrip demand for the foreseeable future; she estimates that the glut of unneeded homes could get as high as 6.2 million over the next six years. The primary reason for this, she says, is that household formation has been very low in recent years, presumably because of the grim economy. (Young adults are living with their parents instead of moving into their own homes, etc.) What’s more, nearly 20 percent of current homeowners no longer qualify for a mortgage, as lending standards have tightened.
Nocera argues that we’re close to a “housing death spiral”: house prices fall –> more borrowers become underwater –> more defaults and foreclosures –> house prices fall further..."
at http://ftalphaville.ft.com/blog/2011/11/07/730891/sizing-the-mortgage-default-mess/
