patrick.net

http://ochousingnews.com/blog/loan-modifications-destroyed-move-market-generation/

Loan modifications for underwater borrowers preserves the debt so appreciation that ordinarily supports a move-up housing market instead flows to lenders.

Lenders limit financed homebuyers based on borrower income, yet many houses sell at prices prices far above the limits of borrowing power because buyers take profits from a previous sale to increase their down payment and bid up prices far in excess of what most first-time homebuyer can afford.

The move-up market functions when equity accumulates; however, unrestrained mortgage equity withdrawal during the housing bubble plus a large number of peak buyers left many homeowners with little or no equity; millions of homeowners are still underwater. Without this accumulated equity, the the move-up market only finds support from the continued withholding of supply by owners who can’t or won’t sell for a loss — a temporary market manipulation, not fundamental support.

Source: http://ochousingnews.com/blog/loan-modifications-destroyed-move-market-generation/#ixzz3B1yzPBn8

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