Problem

Negative equity

Nature:

Negative equity occurs when the value of an asset used to secure a loan is less than the outstanding balance on the loan. In the United States, assets (particularly real estate, whose loans are mortgages) with negative equity are often referred to as being "underwater", and loans and borrowers with negative equity are said to be "upside down".

People and companies alike may have negative equity, as reflected on their balance sheets.

Incidence:

The recession of the 1990s has in the UK resulted in a situation in which more than 25% of recent house buyers (of which nearly half were aged 20 to 24) owed more on their mortgage than they would have been able to raise by selling their homes. The average amount of negative equity had risen from £3,600 in October 1991 to £4,800 in 1992, and to £4,800 in October 1993.

Broader Problems:
Devaluation of real estate
Subject(s):
Commerce Finance
Problem Type:
E: Emanations of other problems
Date of last update
06.05.2019 – 16:09 CEST