possible foreclosure. Foreclosure has a way of ratcheting up our stress levels, and stress — an unwanted ingredient in any recipe — can cause us to respond emotionally. Supply and demand are always changing. In times when plenty of people have the resources and desire to purchase homes, builders start building more to sell. Inevitably, the housing market reaches saturation, the point at which the supply of available homes meets and even exceeds the demand. The overall economy can also have a dampening effect on the ability to afford homes. Times of high unemployment force many people to lose the incomes they rely on to make their mortgage payments. Even those with jobs may be “underemployed” or find their work hours and income reduced. Less money to spend means fewer people can afford to buy homes. When the real estate market slows down, sellers tend to lower their prices to make homes more appealing. A price drop lowers the values of existing homes, too. Many homeowners seek to refinance as a way to regain stability and meet their monthly financial obligations. If you have an adjustable rate mortgage, you might find the mortgage rate is rising, even as the value of your home is dropping. That takes an opportunity to refinance off the table. When housing values plummet — every bubble bursts, eventually — you can be left with negative equity. We call this an underwater or an upside-down mortgage, which means that you owe more on your mortgage than the house is worth. For example, your home might be worth $300,000, but you owe $350,000 on the mortgage. A study of Homeownership Preservation Foundation data of 60,000 homeowners nationwide revealed many “tipping points” that cause homeowners to go over the edge financially.
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