Sarasota Homeowners choose strategic defaults and renting over throwing good money at a sinking “Titanic.”
Sarasota homeowners choose to live over sinking with a house worth LESS than what they owe!
Just a couple hours ago, I returned from another listing appointment comparing to 100 other listing appointments.
Home owner can’t afford his mortgage any longer.
Bank won’t modify his loan.
House is worth LESS than he paid for it…about 43% LESS!
Bank won’t modify or reduce principal.
Homeowners Make Difficult Business Decision….
Therefore, homeowner John has made a business decision after consulting with tax & legal professionals.
John knows his property value will not recover 43% in the next 7 years. Without a second thought, John has decided to join thousands, perhaps 100s of thousands, who are strategically walking away from their homes.
While Sarasota MLS reports increased SALES in and around Sarasota, sale prices are DROPPING!
It’s good distressed prices are selling, reducing inventory. Not so good for sellers whose properties continue dropping in value. I’m not seeing homeowners able (or willing) to show up at a closing with cash to pay the difference between what is owed and sales price of property.
Wall Street Journal & Experian
Confirm Obvious Distress!
In fact, the Wall Street Journal reports rare confluence of factors — mortgages far exceed home values and bargain-basement rents.
Why own when it’s more advantageous to rent?
Job losses and reduced income are forcing owners to become renters. The U.S home-ownership rate has charted its biggest decline in more than two decades, falling to 67.6% as of September from a peak of 69.2% in 2004.
And more renters are on the way: Credit reporting agency Experian and consulting firm Oliver Wyman forecast that “strategic defaults” by homeowners who can afford to pay are likely to exceed one million in 2009, more than four times 2007’s level.
Keep in mind, “afford to pay” is loosely defined as simply being able to pay. Home “owners” are concluding it’s not worth it for them to pay on a sinking liability.
John states what many others tell me, “Banks took billions of my tax dollars to pay off investors and fat cats, while they expect me to honor a mortgage after THEY destroy the economy. Hell with that thinking. I don’t give a damn about my credit. I’ll file bankruptcy if I have to, rather than throw good money at a bad investment…after I live rent free in this house for as long as I can!”
Analysts at Deutsche Bank Securities expect 21 million U.S. households to end up owing more on their mortgages than their homes are worth by the end of 2010.
If one in five of those households defaults, the losses to banks and investors could exceed $400 billion. As a proportion of the economy, that’s roughly equivalent to the losses suffered in the savings-and-loan debacle of the late 1980s and early 1990s.
Ready Or Not, “Strategic Defaults”
Are Here…And Increasing!
Perhaps the fat cats and politicians NEVER considered gave credence to the thought people would walk away from their homes.
Strategic Defaults or “walk aways.” If you work real estate, how may strategic “walks” are you seeing? If you are doing better than ever before, without a care in the world, how long is the finger you’re shaking at people choosing to rent? Scroll down & leave a comment. In your mind, what is needed (besides jobs and principal reduction) to resolve the housing crisis?
Sarasota homeowners are responding to hard times by keeping what money they have rather than throw it at a house worth LESS than what they owe. Until debt owners offer principal reduction along with mortgage modification, strategic defaults will increase in numbers. You know it and I see it. Forget the “you have a moral obligation to pay what you owe” chatter. Those days are gone. Desperate times call for desperate measures in what is being termed The Great “Recession.”
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