18 Percent Of Mortgaged Homes Now Upside-Down

18 percent of mortgaged homes nationwide are now upside-down, according to a report released today by First American CoreLogic, an affiliate of title insurance and real estate services company First American Corp. 64 percent of those homes were in seven hard hit states: Arizona, California, Florida, Georgia, Michigan, Nevada and Ohio. According to a Reuters article:

...states with large numbers of homes with negative equity either had
rapid price appreciation, many homes bought with subprime mortgages or as
speculative investments, steep manufacturing declines, or a
combination.

Nevada was hardest hit, where mortgage borrowers on average owed 89
percent of what their homes were worth, and 48 percent had negative equity.
Michigan was second, with an 85 percent loan-to-value ratio and 39 percent of
borrowers underwater.

David Wyss, chief economist at Standard & Poor's, predicts that home prices nationwide will fall another 10 percent before bottoming late next year, according to a Reuters article. He states, "Things seem to be stabilizing in Michigan, but the big bubble states—Florida, California, Arizona and Nevada—are still very overpriced." He also believes that though New York fared best in the report with only 4.4 percent of homeowners with negative equity, the state is still at risk the economy slows and leaves less money for housing.

Other experts go further by predicting the worst U.S. recession since the early 1980s. All 20 MSAs measured by the S&P/Case-Shiller Home Price Indices saw home prices decline between August 2007 and August 2008. In Q3 of 2008, foreclosures rose 71 percent to a record 765,558, according to RealtyTrac. The Commerce Department said the U.S. GDP fell at a 0.3 percent rate in Q3, according to Reuters.

Recent bank rescue plans have yet to spur lending and ease mortgage rates. This week, the rate on a 30-year fixed-rate mortgage jumped almost half a percentage point to 6.46 percent according to Freddie Mac. In addition, borrowing costs on adjustable-rate mortgages are expected to rise in the coming months. According to the Reuters article, "Last week, Wachovia Corp said borrowers with its "Pick-a-Pay" ARMs and living in or near Stockton and Merced, California, owed at least 55 percent more on their mortgages, on average, than their homes were worth."

Retirement Age Grows More Distant For Many In Wake Of Crisis

Late retirement is becoming a necessity for increasing numbers of older Americans amid the financial crisis. Before the turmoil on Wall Street decimated many retirement portfolios, in a survey conducted last year for a report released by the AARP last week, 70 percent of older workers said that they would retire late for lack of money. There is little doubt that this number has increased since the survey was conducted.

"With people's knee-jerk reaction in looking at both the economy and looking at their own finances, working longer may be the only way to get themselves to remain financially secure," said Deborah Russell, director of work-force issues at AARP. With retirement accounts taking a beating, a simple look at a retirement planning calculator will likely show that people need to work several more years to make up the difference. In addition more people are taking their money out of stocks and other investments out of fear and putting it into low yield things like savings accounts — which also lengthens the time needed to reach their retirement goals.

Late retirement complicates matters for the entire workforce and employers. Older workers may be costlier in terms of salary and benefits, and in an effect some have called "the gray ceiling" younger workers will have fewer opportunities as fewer and fewer elders retire at the previously anticipated age.

"A lot of younger people are waiting for those good jobs. To the extent that older people are not giving up those jobs, that's going to cause problems," said Richard Johnson, researcher at the Urban Institute in Washington.

If older Americans want to keep their jobs, they need to be assertive in doing so in the face of these many pressures on employers. Director of the Center for Retirement Research at Boston College, Alicia Munnell, advises, "Control what you can control. We can't do much about the craziness in the market, but you certainly can control, in many cases, how long you're going to work....We thought that was the right answer even before the financial crisis. Everything has just intensified since then."

Source: Reuters via NPR