What Does It Mean When Economists Say That Home Buyers Are “Underwater” On Their Mortgages?

We may earn money or products from the companies mentioned in this post.

Homeowners who are “underwater” on their mortgage owe more on their home loan than the home is worth. They may be unable to sell the home for enough to pay off the mortgage, and may have difficulty refinancing the loan. This can happen when home prices fall and the borrower has not been making extra payments to reduce the loan balance.

If you’re a homeowner with a mortgage, you’re probably aware of the term “underwater.” But what does it really mean? When economists say that home buyers are “underwater” on their mortgages, they’re referring to the situation where the outstanding balance on the mortgage is greater than the current market value of the home.

In other words, if you were to sell your home today, you would not be able to cover the outstanding balance on your mortgage. This can happen for a number of reasons. Maybe you bought your home at the peak of the housing market and prices have since declined.

Or, you may have taken out a “negative amortization” loan where your monthly payments don’t even cover the interest, let alone the principal. Whatever the reason, being underwater on your mortgage can be a very stressful situation. Not only do you have to worry about making your monthly payments, but you also have the added pressure of knowing that you owe more than your home is worth.

If you’re underwater on your mortgage, you may be wondering what your options are. Unfortunately, there’s not a whole lot you can do. You can try to refinance your loan to get a lower interest rate, but that may not be possible if your home’s value has declined.

You could also try to sell your home, but if the market is slow, you may end up having to sell it for less than you owe.


When economists say that money serves as a store of value they mean that it is quizlet?

When economists say that money serves as a store of value, they mean that it is a good that can be saved and exchanged for other goods and services in the future. Money is a store of value because it can be used to buy goods and services at a later date. Money is also a store of value because it can be saved and invested, which will earn interest or dividends over time.

Finally, money is a store of value because it can be used to pay taxes.

When economists say that money serves as a unit of account they mean that it is?

When economists say that money serves as a unit of account, they mean that it is a measure of value. Money is used to price goods and services, and to record debts and assets. Money is also used as a store of value, and as a way to transfer wealth.

What is the difference between M2 and M1 is that quizlet?

M2 refers to the money supply that includes all physical money in circulation plus all demand deposits, savings deposits, and other time deposits in banks. M1, on the other hand, is a narrower measure of the money supply that includes only physical money in circulation and demand deposits.

Which of the following statements best describes the 12 Federal Reserve banks?

There are twelve Federal Reserve banks located in major cities across the United States. These banks are responsible for the implementation of monetary policy and for providing banking services to depository institutions and the federal government. The Federal Reserve banks are not owned by the federal government, but they are subject to oversight by the Federal Reserve Board of Governors.

what does it mean when economists say that home buyers are

Credit: www.washingtonpost.com

When banks bundled mortgage loans and sold the resulting mortgage-backed securities

Banks have been bundling mortgage loans and selling the resulting mortgage-backed securities since the early 2000s. This practice became increasingly common during the housing bubble of the late 2000s. Bundling mortgage loans involves pooling together multiple loans and selling them as a single security.

This allows banks to sell a larger security to investors, which can be more profitable than selling individual loans. Mortgage-backed securities are attractive to investors because they offer a higher interest rate than most other types of investments. The housing bubble of the late 2000s was caused in part by the increased sale of mortgage-backed securities.

As prices for these securities rose, banks were able to issue more loans and earn more profits. This created a feedback loop that helped to inflate the housing bubble. When the housing bubble finally burst in 2008, it sent shockwaves throughout the global economy.

Banks that had been selling mortgage-backed securities were left holding the bag, and many of them went bankrupt. The resulting financial crisis was the worst since the Great Depression. Today, the sale of mortgage-backed securities is still common, but banks are now required to hold onto a portion of each security they sell.

This helps to reduce the risk of another financial crisis.

Which of the following is true of the fed

The Federal Reserve is the central banking system of the United States and is responsible for implementing monetary policy. The Federal Reserve was established in 1913 in response to the Panic of 1907. The Federal Reserve is made up of 12 regional Federal Reserve Banks, each of which is responsible for supervising the commercial banks in its region.

The Federal Reserve is overseen by a seven-member Board of Governors, who are appointed by the President of the United States.

What does it mean to say that money serves as a store of value

When we say that money serves as a store of value, we mean that it can be used to buy goods and services at a later date. Money is a store of value because it can be used to purchase items now and hold them for future use. The value of money can also be measured by how much it can be used to purchase in the future.

For example, if you have $100 today, you can expect to purchase $100 worth of goods and services in the future. If inflation increases, the purchasing power of your money decreases, which means that you can purchase less in the future.


When a home buyer has a mortgage that is larger than the current value of their home, they are said to be “underwater” on their mortgage. This can happen when the value of a home decreases, or if the buyer takes out a larger mortgage than the home is worth. Being underwater on a mortgage can make it difficult to sell the home or refinance the mortgage, and can lead to foreclosure.

Author profile

Sophia Anthony is a freelance writer and blogger, covering health and fitness topics through visual representation. She is very passionate about general health and beauty. Apart from work she likes dancing and listening to music. You can also contact her on Facebook, and Instagram.

Leave a Comment