The Way We Live Now - Walk Away From Your Mortgage! - NYTimes.com: "Time was, Americans would do anything to pay their mortgage — forgo a new car or a vacation, even put a younger family member to work. But the housing collapse left 10.7 million families owing more than their homes are worth. So some of them are making a calculated decision to hang onto their money and let their homes go. Is this irresponsible?"
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You be the judge.
3 comments:
It certainly represents a shift away from the traditional financial planning doctrine that for most people, owning a home is among the best means of building long term wealth. Especially given that it can be done with someone else (i.e. a mortgagee) providing the the bulk of the up front capital. Now it appears homebuyers aren't willing to hold real estate for the long run and want to bail out in a down market cycle just as unsophisticated investors do with securities. However, unlike with stocks they don't lock in their losses and are only out whatever mortgage payments they've made.
Why shouldn't home owners make the same kind of economic decision that is made by all other institutions? If an investment made by a company goes bad they bail out, so should the home owner.
If the home burdened by an HOA then you are unloading an obligation, not an asset. The "investment" aspect was already risky since a Board (under constant urging by CAI attorneys) could divest you of your home at any time.
The more equity you built up, the more attractive your home became for a private taking for the benefit of the HOA vendors.
For Fred: the homeowners also won't have decades of payments on property that isn't worth those payments. Although it is not a simple outcome due to transaction costs, etc.- from a purely economic standpoint why shouldn't the homeowner unload? Brent White's, "Underwater and Not Walking Away:
Shame, Fear and the Social Management of the
Housing Crisis" presented some points worth considering.
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