What Does Underwater on your Mortgage Mean?

The home market in the US has fluctuated greatly in the past 15 years. Above  is a graph of the home prices in the Twin Cities, Minnesota area, from 2005 - January 2022. 

What "underwater" means is that a house you bought can only be sold for less than you paid. Then it is hard to sell your home for what the mortgage is worth, and many people end up going into foreclosure.  

If you are planning on buying and holding it won't matter as much. Home ownership is a path to financial security. But if you want to keep your options open about selling, you may want to consider waiting till the market cools off. Of course, it does take a crystal ball to predict market movements...

The below video explains more about being  underwater.

2008 Market Crash

In 2008-2011 the home market crashed. Reasons include how loans were repackaged and sold, because lenders were giving loans without requiring proof of income ("stated income loans"),  giving loans for more than the house was worth, and even banks were betting on the stock market against their own loans.  Many banks failed, and house prices dropped to a fraction of what people had mortgaged them for. Some are wondering if the market will crash again in 2022.

Why the Fluctuation in Home Prices?

There is a correlation between the interest rates on people's loans and home prices, and that can determine the health or downturn of the home market.  First, the lower the rates, the more people can pay, because the higher amount of a loan they can get from their lender. 

Secondly, the Federal Reserve ("the Fed") can arbitrarily set interest rates.  This can steer the economy any way they wish. 

The Controversy around the Fed

There is a tremendous controversy about the Fed, as it is a private organization, dictating to the US government and taxpayers how the economy will go. (This IRS is also a private corporation.)

This video explains who the Fed  just magically decided in September 2021 to lower interest rates -- and how that will affect how much  of a loan you can get.

 This video explains how the Fed has consolidated its control of the US monetary system.