All areas of the country are not created equal when it comes to the real estate mortgage recession. Foreclosures are at their worst in the so-called ‘rust belt’ states where the factory layoffs and closures have caused significant unemployment. Mortgage defaults were at their worst in Ohio, with a huge 3.3% rate of default, slightly behind them, Indiana, with 2.8%.
At the other end scale California has fared the best with just 0.17% and Hawaii at 0.23%, not too distant second. It is not so much that the real estate market is better in these states. It is has more to do with the action that has been taken to mitigate mortgage defaults, giving mortgage holders more options to avoid foreclosure procedures.
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The National Association of Home Builders has said in an announcement in Orlando Florida, that it feels that real estate troubles brought on by the sub-prime mortgage mess are not over yet, and that what they referred to euphemistically as ‘housing contraction’ will continue, and that Florida will find it particularly hard to recover from the slump.
Florida experienced fast and exciting growth in real estate sales and mortgage provision over the last few years, and with this growth, came a glut of sub-prime mortgages, which have now turned to bite Florida real estate posterior, this in turn will lead to a glut of available real estate, which will undoubtedly take a long time to resolve.
In London, there is a large category of real estate in the £2m/$4m to £5m/$10m, with the average price in the Kensington district of London now in excess of £1m/$2m, these super-prime pieces of real estate also carry super-prime mortgages.
And this is producing a lot of nervous mortgage companies who supply the funds for these high-end real estate purchases, at this level of pricing the slightest shift in interest rates on a £2m/$4m mortgage will result in huge leaps in monthly mortgage payments.
With chaos in the world mortgage business caused by the opposite end of the market, sub-prime, real estate mortgage debacle, the ripple effects could cause very serious problems at the very top end of the London mortgage market.