Europeans are not out of the woods and attention needs to be paid to all European economic policies ensuring that health is injected into each housing market. Lower house prices reduce the amount of borrowing that households can raise against a property. Less access to credit tends results in less spending, less home moving and less economic stimulants.
Housing market falls increases the loan-to-value ratio of mortgage debt (the value of the debt will rise as a percentage of the value of the property as prices fall). In some cases, this leads to negative equity, whereby even selling the house will not be sufficient to repay the debt. This traps people in their properties, prevents them from borrowing further against the property, or forces them into bankruptcy.
In all scenarios, owners can’t clear their debts or take a profit on a sale — and that depresses spending too. This nightmare situation is developing now and its time to wake up before we hit another Global Financial Crisis.
read more at LinkedIn – Why Suicidal Housing Markets Can Kill!