Negative Home Equity and Poor credit outlook leaves homeowners cold

Home prices all over the world are falling at an alarming rate. In the United States, many homeowners are already finding themselves in a situation where they are facing negative equity in their homes, meaning that they owe more to the bank than what the house is actually worth. When home prices were at their high a couple of years ago, there was a greater amount of wealth. Now that the recession has hit, the amount of wealth all over the globe has also taken a cut.

PricewaterhouseCoopers (PWC) in the United Kingdom has said that the current credit crisis has wiped out 1.9 trillion pounds in wealth in the United Kingdom alone. The loss equates to 40,000 pounds lost per person in the UK over the age of 18. Home prices in that country have also fallen by 17% to just over 150,000 pounds on average for a home.

Another company, the Financial Services Authority (FSA) estimates that if home prices were to fall 30 percent from their 2007 highs, 2 million United Kingdom homeowners would fall into negative equity. At the end of December 2008, Lloyds Banking Group estimated that one in every six homeowners in the United Kingdom is already having a problem with negative equity in their homes.

Poor credit situations have led to many people being unable to get credit. Every day it seems there are more credit card and loan applications that are rejected. It is hard to watch families find themselves in the situation where they do have to try to hope that credit cards will help get them to the next month.

When there was so much wealth going around just two years ago, it is hard to see how things ended up the way they are now. The credit crunch has eliminated a lot of desire for unnecessary items. Families are starting to have to find new things to do to entertain themselves. Frugality has become the new “trend.” It seems that the more frugal a family can be, the better prepared they are for whatever may come their way. This is the way it should have been though. There shouldn’t have been as much needless spending. There should never have been people getting into mortgages they knew they couldn’t afford, and on the same note, there should have never been banks falsifying documents to make it seem like those people could afford those homes.

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