Tuesday, December 4, 2007

Negative Equity

The financial markets are in full-blown crisis mode for two primary reasons: 1) A classic equity bubble that burst in the US (and global) housing markets and 2) Financial "Innovation" from Wall St that really was nothing more than leverage, leverage, and leverage. Both are unwinding right now.

Calculated Risk, a must read blog for anyone interested in financial markets, has an interesting run-down on the current state of US mortgage holders with negative equity (those that owe more than what the house is worth). This is obviously going to be a bigger and bigger issue as home prices decline further. This leads to more foreclosures because people have no reason to continue to pay for a home that depreciates in value.

Worth a look.

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