Last time housing prices went down, there ended up being a lot of people who owed more on their houses than those houses were worth. The banks took their houses, sold them at firesale prices, and then went after the former owners (who were now renters) for the rest of what they owed.
There were several different issues at play there. Being underwater on your mortgage isn’t great but it won’t make the bank repossess it. You have to stop paying your mortgage for that to happen.
That happened in most cases because they had variable rate mortgages. When interest rates skyrocketed, so did people’s monthly payments which made them unable to afford them.
The real lesson for consumers was to never get variable rate loans, always lock in that interest rate, you can always refinance later if interest rates go down
Last time housing prices went down, there ended up being a lot of people who owed more on their houses than those houses were worth. The banks took their houses, sold them at firesale prices, and then went after the former owners (who were now renters) for the rest of what they owed.
There were several different issues at play there. Being underwater on your mortgage isn’t great but it won’t make the bank repossess it. You have to stop paying your mortgage for that to happen.
That happened in most cases because they had variable rate mortgages. When interest rates skyrocketed, so did people’s monthly payments which made them unable to afford them.
The real lesson for consumers was to never get variable rate loans, always lock in that interest rate, you can always refinance later if interest rates go down
There was also a wave of layoffs around that time, which was another way to get foreclosed.