Good point about the long term fixed mortgages available in the US – I don’t know why they aren’t available anywhere else – I suspect there is more competition in the US banking industry?

Mike

The major difference between the US, and Canadian/UK markets is the availability of long-term financing without the risk of margin calls and rate resets. Most loans written in Canada have a margin call provision every 5 years, along with a rate reset. In America, you can get a true 30-year loan quite inexpensively, which allows people to take on commensurately more risk and elevates pricing.

People got into loans that they could not afford, where the interest would increase over time. Based on this increased interest people are in a sub prime crisis. Because of this they are looking to refinance to get better terms, but they cannot refinance because the value of the homes have decreased.

Therefore people have to jump. They have few other options. Paying rent for some is more difficult then others. Some have jumped in over their heads…

Gates – the more people that read it – the better!

GIV – I really hope that home owners don’t panic.

Kyle – that’s the right attitude.

I get what you’re saying, but I’m not sure it’s quite correct, as it’s written here. I may not be logical, but that doesn’t mean people won’t do it. So the number of “upside-down” homeowners seems as decent a proxy for the housing market’s health as some of the others that get bandied about.

The fact is, a lot of people new to the real estate game will panic and sell at a loss once they’re upside down, regardless of the fact that it’s a stupid thing to do.

Nothing like a little tough love. I’m with you completely on this one.

Complaining about being underwater on your mortgage is just outright foolishness and demonstrates a severe lack of “finances 101″. I hope that everyone there reads your blog post.

However, contra Mr. Cheap, I am of the opinion that real estate can only go up, up, up, up in the long term if two conditions are present: (1) there is only a certain amount of land, and (2) more people want to live on that land than did a few years ago. Since I don’t see these two conditions changing any time in my lifetime, or that of my grandchildren, or even that of my grandchildren’s grandchildren then I think real estate will always be a good long term investment (unless the government gets all imminent domain on your heiny, then I recommend gun ownership).

DFR – I’m glad we agree. I think you should do the post anyways. I’m sure you will have a different take/slant on it.

Cheap – good point. It’s odd that you can just walk away from a mortgage in the US. I wonder why they would allow that?