why do AZ, CA, FL and NV have the highest % of underwater mortgages

[PauletteGoddard]

Article: Nearly a quarter of residential mortgages underwater

Are those the states that had a higher concentration of Countrywide offices a few years ago?
Was housing demand in states with hurricanes and droughts heavier than in other states? It seems curiously ironic that "underwater" mortgages would be in states that have limited sources of local water.
Were baby boomers buying land there with the expectation of retiring in desert communities?

I can understand Michigan's high % (35) of underwater mortgages, as its major industry has practically died.

[jIM_Ohio]

Arizona- hot bed for retirees (dry air, mild climate)

CA- West coast- its an Ocean thing (when you get west of Mississippi, population density of the country is low, until you hit the coast). In general I think if California were a country, it would have one of the 50 highest GDP in the world- there is a lot happening in whole state (its a big state too).


FL- just like Arizona- mild climate, lots of retirees.

Nevada- Vegas Baby- lots of money gets thrown around in Vegas, and that has nothing to do with gambling.

Where you have population density, or population growth, real estate as an industry will be profitable. The more profitable it is, the more speculators will exist, driving up demand, limiting supply and raising prices

[PauletteGoddard]

If real estate investors have lots of money they wouldn't be underwater on their mortgages, unless they were amoral investors without a shred of integrity or good timing ready to bail and let everyone else suffer.

Wouldn't retirees have enough amassed to pay for their homes without mortgages, or at least a small one to not be underwater? "Ehhh I bought a $260K house in Brandon, had a $15K 10-year loan and defaulted within eight months."

[jIM_Ohio]

Originally Posted by PauletteGoddard

If real estate investors have lots of money they wouldn't be underwater on their mortgages, unless they were amoral investors without a shred of integrity or good timing ready to bail and let everyone else suffer.

Wouldn't retirees have enough amassed to pay for their homes without mortgages, or at least a small one to not be underwater? "Ehhh I bought a $260K house in Brandon, had a $15K 10-year loan and defaulted within eight months."

First, if an area has lots of real estate activity, its prices will inflate.

Think NYC and Washington DC.

What causes the price increase to become a bubble is when the real estate is financed as opposed to paid in cash.

[MonkeyMama]

Places like Sacramento and Vegas were WAY overbuilt and overbought. People buy in CA/FL mostly due to weather. AZ and NV became attractive as California became insanely expensive (started long before the bubble took shape). They are only attractive because they are close (I don't think it's the desert climate!)

I haven't seen as much price fluctuation in the San Francisco area. (I don't know many people under water there). BUT, most of the people I know could not afford to live there and spread out to less populated cities in California, as well as AZ and NV. I think, being used to high housing prices, they weren't very price sensitive and were easily willing to pay (um, borrow) $500k-ish for a nice home (a BARGAIN!) in areas where high property prices could not be supported with wages.

In the city I am in, Sacramento, anyone who bought in 2002 to the present is under water. Which is probably well over half the population, considering the huge increase in population the last decade. Mostly immigrating in from San Francisco Bay Area & LA area. PRices are $400k lower than the peak, today.

I actually know a TON of people who moved up to Oregon/Washington as well, but I think Oregon/Washington has a lot more to offer and people tended to stay there. Places like Sacramento and Vegas? People came in droves, and then left. Housing supply will outpace demand for a LONG time!

[Beppington]

I think it's back to good ol' supply & demand, & the correction that happens when they get out of whack. Supply out-pacing demand in these areas because, at least in FL & CA, people treat the beach like a rarity, or jewelry or bling: They seem to think that since there's a finite amount of beach, & people are attracted to the beach, that makes it OK to pay more & more for it, & speculate on it, to greater extents than non-beach areas.

[jIM_Ohio]

Originally Posted by Beppington

I think it's back to good ol' supply & demand, & the correction that happens when they get out of whack. Supply out-pacing demand in these areas because, at least in FL & CA, people treat the beach like a rarity, or jewelry or bling: They seem to think that since there's a finite amount of beach, & people are attracted to the beach, that makes it OK to pay more & more for it, & speculate on it, to greater extents than non-beach areas.

This is true
if I lived near an Ocean, I would want to be closer to it

the same way that properties closer to ski resorts are worth more than random houses in the mountains.

Location is the #1 factor when dealing with real estate- like I said before you cannot just pick up your house and move it.


Just because you do not value that location does not mean others should not value it. For example I plan to retire close to where I can ski and white water raft. I might need to pay another 50-75k for that type of house/location.

You might think I overpay, but because you do not live there should not give you the "right" to second guess what is best for me.

Make sense?

[Beppington]

Originally Posted by jIM_Ohio

This is true
if I lived near an Ocean, I would want to be closer to it

the same way that properties closer to ski resorts are worth more than random houses in the mountains.

Location is the #1 factor when dealing with real estate- like I said before you cannot just pick up your house and move it.


Just because you do not value that location does not mean others should not value it. For example I plan to retire close to where I can ski and white water raft. I might need to pay another 50-75k for that type of house/location.

You might think I overpay, but because you do not live there should not give you the "right" to second guess what is best for me.

Make sense?

I guess that was directed to me? I wasn't trying to tell you not to pay more for what you want, just explaining that I think supply-&-demand being more out of whack in beach areas is a big cause of CA's & FL's higher % of underwater mortgages.

[jIM_Ohio]

Originally Posted by Beppington

I guess that was directed to me? I wasn't trying to tell you not to pay more for what you want, just explaining that I think supply-&-demand being more out of whack in beach areas is a big cause of CA's & FL's higher % of underwater mortgages.

Fair enough
I misunderstood your post
my apologies