SST reports on several stories of negative equity situations happening in Auckland.
That’s when the value of a house is less than the money owed to the bank.
“One home had mortgages to ASB for $723,000 and Finance Assist for $150,000. It sold for $535,000.
“The mortgage was to Property Finance Securities (in receivership) for $1.363m. After much encouragement from the auctioneer it sold to a dapper gentleman in a pinstriped suit for $780,000.
When negative equity occurs the financially logical, if not exactly ethical, thing for owners to do is to walk away from the mortgage (and perhaps declare bankruptcy). The banks force the house into a foreclosure auction and walk away with less money than they are owed.
It’s called judgment day.
The day when all the “it’s too good to be true” stories finally become exposed for the confidence trick that they are
The day when the leveraged speculators that got in late into the real estate boom move from being paper millionaires to paupers playing with worthless paper
The day when the media turns against the industry, the editorial and advertising pages dedicated to real estate shrink and the commentary begins to have a sharp edge
The day when we all recall how it was in 1987, and how housing prices took years and years to recover
The day when the bubble is exposed as it bursts
The day when dapper gentlemen in pin striped suits start to become interested in picking up a bargain or two.
The day when I start to become mildly, oh so mildly, interested in real estate.