You’re thinking of wealthy people who don’t have a mortgage and “only have $150k more” to come up with. And as I explained above, it’s not just the wealthy looking to move up to a pricier home; growing your house as the family grows is just standard practice for an American family over the last 70y.
It is a very common case for couples to put everything they own together to make a 20% downpayment (if they’re lucky).
So for a $600k house, that’s $120k downpayment and a $480k mortgage. We’re saying the house loses half its value, so it’s now worth $300k and their equity is now worth $60k. But they still have a $480k mortgage to deal with. If they sell the house for $300k and put all of that toward the mortgage, they still have to come up with $180k just to get the bank of their backs and have nothing to show for it! They could continue paying the mortgage, but it is worth far more than the house is. They’re now at the point where it would be cheaper to walk away from the house, let the bank foreclose it, and then rebuy it (or a similar one) at $300k instead of $480k. But they won’t have any money to do that with, and their credit will be demolished by the foreclosure, so they won’t be getting another mortage any time soon. So that’s not even a real option.
Not only is moving to a larger house to support a growing family no longer an option, they’ll be lucky to still be in a house at all.
You’re thinking of wealthy people who don’t have a mortgage and “only have $150k more” to come up with. And as I explained above, it’s not just the wealthy looking to move up to a pricier home; growing your house as the family grows is just standard practice for an American family over the last 70y.
It is a very common case for couples to put everything they own together to make a 20% downpayment (if they’re lucky).
So for a $600k house, that’s $120k downpayment and a $480k mortgage. We’re saying the house loses half its value, so it’s now worth $300k and their equity is now worth $60k. But they still have a $480k mortgage to deal with. If they sell the house for $300k and put all of that toward the mortgage, they still have to come up with $180k just to get the bank of their backs and have nothing to show for it! They could continue paying the mortgage, but it is worth far more than the house is. They’re now at the point where it would be cheaper to walk away from the house, let the bank foreclose it, and then rebuy it (or a similar one) at $300k instead of $480k. But they won’t have any money to do that with, and their credit will be demolished by the foreclosure, so they won’t be getting another mortage any time soon. So that’s not even a real option.
Not only is moving to a larger house to support a growing family no longer an option, they’ll be lucky to still be in a house at all.