Three real estateReal Estate is land and anything permanently attached to it, such as buildings and improvements. summaries released this week, including the CoreLogic Negative AmortizationAmortization is a payment plan which enables the borrower to repay his debt gradually through monthly payments of principalPrincipal is the amount of money you borrow if you're getting a home loan. If you're buying a bond, the principal is the amount you're lending. Typically, you'll buy bonds with a face value of ,000. If you buy a ,000 bond, your principal is ,000. and interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds.. Amortization tables allow you to see exactly how much you would pay each month in interest and how much you repay in principal, depending on the amount of money borrowed at a specific interest rate.Negative Amortization is a condition created when the monthly mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. payment is less than the amount necessary to pay off the loanA Loan is an amount of money that is lent to a borrower, who agrees to repay it plus interest. over the period of time set forth in the note. Because you're paying less than the amount necessary, the actual loan amount increases over time. That's how you end up with negative equityYour share of ownership in a company. Stockholders are often referred to as equity investors, because they invest in the equity of a company. . To pay off the loan, a lump-sum payment may have to be made. Report and the S&P Case-Shiller Home Price Index, left me with a poor impression of the real estate 2012 outlook. And as usual, providing personal finance advice, real estate advice and consumer advice on the Ilyce Glink Show March 4, 2012 on WSB Radio.
Ben Bernanke, the chairman of the Federal ReserveThe Reserve is the amount of money set aside by a condo, co-op, or homeowners' association for future capital improvements. claims to see modest improvements in the economy. The stock market has been flirting with 13,000 and it’s a good time for Dow investment. GDP growth for 2011 topped three percent and the unemployment rate is down. All of this is good.
However, three different real estate reports that hit my inbox this week have made me a little nervous for our national economic prospects all over again:
- CoreLogic Negative Amortization Report – In the fourth quarter of 2011, fully 28 percent of all residential homeowners were underwater with their mortgage loans. This means homeowners are experiencing negative or no equity (less than five percent). In addition, mortgage debt rose to three trillion dollars during the same period.
- S&P Case-Shiller Home Price Index – Home values have fallen 13 percent since December 2010 and continue to decline.
- Foreclosures still account for 24 percent of all home sales, and that figure doesn’t even include short sales. There are more foreclosures coming which in turn will lower home values further. It’s a vicious circle (see #2, then #3).
Folks, how do we dig out of this hole in the housing market? What can be the real estate 2012 outlook with this confluence of bad news?
Real estate was the cornerstone of growing wealth for generations. America has NEVER come out of a recession where growth and investment in the housing market was not a tent pole. And with property prices still falling like a blue light special at Sam’s Club how can we feel secure? Also keep in mind that unlike other investments the purchase of a home creates emotional ties.
I’m worried. What do you think?
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