mkaz tumbles along

There is a basic notion that falling home prices leads to foreclosures, this is just not that case. A home owner’s mortgage payment will not change becaue his house is worth less than it was when he first got the loan.

The mortgage payment will only change when the loan is reset, say for a 5/7 year ARM or in a refinance. Since interests rates are low both of those should not cause a higher mortgage payment.

A more realistic reason the housing market is having foreclosures is because people can’t afford to pay their loans. This is most likely due to unemployment, considering the nation has 8.5% rate, highest in many years.

This New York Times article only mentions unemployment once and that was in quoting someone else.