Then there's the question of who can afford a home. A new banking industry report shows a record 12 percent of all U.S. homeowners are now in foreclosure or late on their mortgage payments. On a deeper look, you can see those that are late on payments are not just people with /*subprime loans*/.
The newest group of people falling behind on their payments may surprise you.
"A two-person working family, probably the typical two kid situation and high tech jobs in Silicon Valley here, earning in excess of $150,000 combined annually," says Quincy Virgilio, the Santa Clara County Association of Realtors president.
They're people who put down 20 percent and got prime loans at lower rates because of their good credit. However, layoffs triggered by the recession are making it difficult for them to keep up with their loan payments.
In California, 7.51 percent of homeowners with prime loans are delinquent paying their mortgage. That's almost double the national rate a year ago. By comparison, 22.67 percent of subprime loans are late. But that's only a 5 percent increase from this time last year.
"I'm not surprised it's happening. It's disturbing. I have a lot of friends that are having difficulty making mortgage payments that have been recently laid off," says Kathryn Emery, an unemployed registered nurse.
The foreclosure rate is also causing concern. Among prime loans, 1.61 percent of borrowers have received a first notice of foreclosure. About 7.3 percent have been in foreclosure over 90 days. Chris Gangai, who just got laid off Thursday, has friends scrambling to make their house payments.
"They're selling off motorcycles, they're selling off personal watercraft, boats, cars even because it's gotten so bad," says Gangai. "These are guys who had perfect credit. Now everything's kind of falling downhill."
It's not just layoffs causing this trend. A pinch is also being felt when workers have their pay or hours cut.
As dismal as those numbers are, they only cover the first three months of this year. If the trend continues ensnarling more homeowners, it will have serious implications for the California economy.