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Why we’re fucked…
So far, housing is down 8.4%. That means that 13.5% of homeowners currently have negative equity in their homes. Goldman Sachs has predicted that if we have no recession, housing will drop to 15% of peak value, leaving 21% of homeowners with negative equity. Should a recession occur, Goldman Sachs predicts housing to drop to 30% of peak value. This would leave 39% of homeowners, about two out of five, with negative equity.
So what does this mean? It means homeowners will simply walk away from their mortgages. They’ll pack their stuff up, rent new places, and let their mortgages slide right into default. After all, it’s really the only logical thing to do in such a situation.
Synopsis: We’re fucked. My suggestion is to scale back, transition to recession resistant careers, and hold cash in foreign currencies.
Here’s my source article from The Motley Fool.
Hungry for more?
My brother is down 70k from the peak and about 10k from where he bought! He is NOT too happy about it. At least he cash flows a little bit.