i told my wife several years before this concept was a news story as prices started to come down that i thought strategic defaults would occur. I didn’t call them stratgeic defaults, i just said, “babe, I bet ya my vo-workers whos till have jobs are going to bail on some of these giant mortgages even though they can pay.”
She said i was being an idiot and that normal people would never do that, they just stay in their house and
ride it out, and I don’t understand how normal people think, etc etc…. She was basing her opinion off of her experience with family and friends and doesn’t spend really any time thinking about these issues or the magnitude of the situation
(not that that is bad, or that i am smart, or anything like that — just a fact. She’s not interested, and defers to my paranoia/pseudo-expertise).
What is interesting is not that she was wrong, because I think her opinion would be clearly a majority opinion at that time, but how certain she was that my thoughts were laughable and outlandish a couple years ago, and how quickly it’s become a real social issue.
If prices are flat for a few years and things don’t materially improve, and there is no light at the end of the tunnel for decent appreciation, this type of thinking could become embedded in homeowner’s minds, and there is a steady flow of foreclosures into the future.
