From a strictly selfish point of view, the more people who walk away, the more downward pressure there should be on home prices, and the cheaper it will be for us when we decide to actually pull the trigger. So I’m all in favor of people walking away, although I realize this will continue to cause short term stress to the economy.
I think a huge percentage of seriously underwater homes were purchased in the last 5 years. Most of the bank-owned properties I see listed right now were in fact purchased in 2005, and we’re just about the time the 5/1 ARM is resetting. Of course, those are almost certainly people who can’t afford the payments on their underwater homes.
End of the day, it’s a lot easier to walk away from a home you’ve lived in for 3-5 years than 25. I would have loved to see my mom sell her house at the peak of the bubble, but she’s lived there 3 decades and couldn’t clean out her basement in less than a year. Us kids grew up in that house, and there are a lot of memories there. It sounds like the woman in the article retired and bought her new home in 2005, so it’s not like she had a lot of emotional stake there.
Bankruptcy sticks with you for what, 7 years? Faced with a choice of walking away and breaking even and facing 7 years of bad credit or 14 years of house payments to get back to zero, I have a hard time faulting people for taking 7 years, unless they LOVE their home. I actually know one couple that did a strategic default, and one couple that chose not to. Both could afford the payments, both are about 100K underwater. The ones that stayed love the house, the other they can easily find the same house as a rental for a lot less per month.
End of the day, it’s just business, and all legal.
