Former Governor Charlie Crist gets distracted while inspecting a beach for oil.
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Wesley Ulloa bought her first condo for $230,000 in 2007, and watched helplessly as it lost two-thirds of its value during South Florida’s historic housing market tailspin.
The 24-year-old real estate agent has been selling units in her Coconut Grove building for $80,000, a figure that makes her shudder each month as she makes her mortgage payment.
She’s one of hundreds of thousands of South Floridians coping with the reality of being underwater on their mortgages—one of the most widespread side effects of the real estate market collapse.
“I get a little angry. I think ‘Man I bought this for $230,000 and for what I’m paying, I could be in a house’,” she said. “But I can’t dwell on it. I mean, what are you going to do?”
As more than $113 billion worth of home equity has vanished from South Florida’s housing market in the past five years, the number of homeowners with mortgages that are larger than the values of their properties has become enormous. More than 300,000 South Florida mortgages—or 43 percent of them—are currently underwater, the highest level in decades, if not ever. That’s about four times the number of homes in foreclosure.
The underwater problem has been a thorn in the side of a housing market plagued with tight credit, record-high foreclosures and high unemployment. It has contributed to a deluge of loan modification requests, pushed up the foreclosure rate and helped revive a once-taboo exit strategy—the strategic default.
It has also brought about untold levels of stress for homeowners who bought or refinanced at the peak of the market and have seen their homes turn into depreciating investments. Because of the current turmoil in the market, many of these owners can’t sell their homes without taking a loss, and most won’t be able to break even for years, or decades.
The implications are profound for a sputtering economy that was once fueled by homeowners tapping into their home equity for kitchen improvements, vacations, new cars, boats and the like. That option doesn’t exist when you are underwater. People feel poor and disinclined to buy when their home has negative equity.
Richard Walsh saw his home start to shed value shortly after he bought the three-bedroom in 2007 for $550,000. Walsh put down 25 percent of the purchase price when he bought the Northeast Miami-Dade home but, based on the market value of the house, just about all of that money has since disappeared.
The 67-year-old retired firefighter says the home is worth about $380,000, but he has never considered walking away.
“When I sign my name to a paper, I’m obligating myself whether I like it or not,” he said in a response to a Miami Herald query.
Walsh reasons that he has benefitted from the rising real estate market over the years—he bought his first home in the 1960s. He also believes history points to an upwardly trending market, and he’d rather wait for the home to appreciate than walk away from a property and neighborhood he likes.
“There’s an old saying: ‘If you don’t like the weather, wait a minute’,” he said. “That’s how I feel about real estate. If you don’t like the market—just wait.”
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