The housing market is not going to improve anytime soon with the Wall Street Journal and other prominant financial papers advising people to walk away from their mortgages. Our area is down in value about 33% with in many cases is $100,000.
It is estimated that at Least 25% of people in default are strategic defaults. This is unprecedented in history. The only way out of this is for the banks or federal government slash the debt/ principle on these loans. Wall street journal http://online.wsj.com/article/SB10001424052748703795004575087843144657512.html?mod=rss_Today's_Most_Popular http://articles.latimes.com/2010/mar/17/business/la-fi-walkaway17-2010mar17 More homeowners are opting for 'strategic defaults' Underwater on their mortgages and angry at banks, more borrowers are choosing to hand over the keys, even if they can afford the payments. March 17, 2010|By Alana Semuels Wynn Bloch has always dutifully paid her bills and socked away money for retirement. But in December she defaulted on the mortgage on her Palm Desert home, even though she could afford the payments. Bloch paid $385,000 for the two-bedroom in 2006, when prices were still surging. Comparable homes are now selling in the low-$200,000s. At 66, the retired psychologist doubted she'd see her investment rebound in her lifetime. Plus, she said she was duped into an expensive loan. The way she sees it, big banks that helped fuel the mess all got bailouts while small fry like her are left holding the bag. No more. "There was not a chance that house was ever going to be worth anywhere near what my mortgage was," said Bloch, who is now renting a few miles away after defaulting on the $310,000 loan. "I haven't cheated or stolen." Time was when Americans would do almost anything to hang on to their homes. But that commitment appears to be fraying as more people fall behind on their loans while watching the banks and lenders that helped trigger the financial crisis return to prosperity. Nearly one-quarter of U.S. mortgages, or about 11 million loans, are "underwater," i.e. the houses are worth less than the balance of their loans. While home values are regaining ground -- median prices rose 10% in Southern California last month to $275,000 compared with a year earlier -- they remain far below the July 2007 peak of $505,000. Many homeowners are just coming to grips with the idea that prices will take years to reach the pre-crash peak: as long as 14 years in California, according to economist Chris Thornberg. Stuck with properties whose negative equity won't recover for years, and feeling betrayed by financial institutions that bankrolled the frenzy, some homeowners are concluding it's smarter to walk away than to stick it out. "There is a growing sense of anger, a growing recognition that there is a double standard if it's OK for financial institutions to look after themselves but not OK for homeowners," said Brent T. White, a law professor at the University of Arizona who wrote a paper on the subject. Just how many are walking away isn't clear. But some researchers are convinced that the numbers are growing. So-called strategic defaults accounted for about 35% of defaults by U.S. homeowners in December 2009, up from 23% in March of 2009, according to Luigi Zingales, a professor at the University of Chicago's Booth School of Business. When It's OK to Walk Away From Your Home By BRETT ARENDS..ArticleComments (141)more in Investing ».EmailPrintSave This ↓ More. .facebook Twitter Digg StumbleUpon + More close Yahoo! BuzzMySpacedel.icio.usRedditLinkedInFarkViadeoOrkut Text .Millions of Americans are now deeply underwater on their mortgage. If you're among them, you need to stop living in a dream world and give serious thought to walking away from the debt. No, you shouldn't feel bad about it, and you shouldn't feel guilty. The lenders would do the same to youin a heartbeat. You need to put yourself and your family's finances first. How widespread is this? More than 11 million families are in "negative equity"that is, they owe more on their home than it is worthaccording to a report out this week by FirstAmerican Core Logic, a real-estate data firm. That's a quarter of all families with mortgages. And for more than five million of those borrowers, the crisis is extreme: They are more than 25% underwaterthe equivalent of having a $100,000 loan on a property now worth just $75,000 or less. That's true for a fifth of mortgage holders in California, nearly a third in Florida and an incredible 50% in Nevada. Are you in this situation? Are you still battling to pay the bills each month, even when it may make little financial sense to do so? It's time for some tough talk. Stop trying to chase your lost equity. That money is gone. Don't think like the gambler who blows more and more cash trying to win back his losses. That's how a lot of people turn a small loss into a big one. And do the math. Even if you hope the real estate market is near the bottomit's possible, but by no means certainit may still take years to see any meaningful recovery. If you are 25% underwater, your home will have to rise by 33% just to get you back to even. Is that likely? And over what time period? Even if home prices rose by 5% a year from here, that would still take six years. And during that time you could instead be building fresh savings elsewhere. View Full Image Bloomberg News A real-estate agent moves a torn "Lender Foreclosure" sign outside a foreclosed home in Reno, Nev., last Monday. .If you are reluctant to give up on "your" home, realize that it isn't "yours." If you are in negative equity, it's the bank's home. You're just renting it. And right now you may be paying way above market rates. You need to be ruthless about your cash flow. Are you worried about the legal consequences of walking away? Certainly, you should check with a lawyer before doing anything, but the consequences will probably be more limited than you think. In "non-recourse" states, the mortgage lender may have no right to come after you for any shortfall. They may have no option but to take the home, sell it and eat the loss. According to a survey last year by the Federal Reserve Bank of Richmond, such states include negative-equity hot spots California and Arizona. Even in "recourse" states, lenders may have limited ability to come after you. Often they'd have to jump a lot of legal hurdles, and it's just not worth it for them. They're swamped with cases anyway. "In my experience, right now they're not really going after anyone," says Richard Nemeth, a bankruptcy attorney in Cleveland. "They just don't have the resources." If you've taken smart steps to protect your money, you may be safer still. For example, money held in a 401(k), Individual Retirement Account or pension plan is sheltered from creditors. Sure, a strategic foreclosure may hurt your credit score. But if you're in financial difficulties, it's probably already suffered. And your credit score is not the only thing in life that matters. Still, when it comes to the idea of walking away from debts, many people are held back by a sense of morality. They feel it's wrong to abandon their obligations. They don't want to be a deadbeat. Your instincts, while honorable, are leading you astray. The economy is fundamentally amoral. Sometimes I think middle-class Americans are the only people who haven't worked this out yet. They're operating with a gallant but completely out-of-date plan of attacklike an old-fashioned cavalry with plumed hats and shining swords charging against machine guns. Do you think your lenders would be shy about squeezing you for an extra nickel if they thought they could get away with it? They knew what they were doing when they wrote your loan. Many were guilty of malpractice, but they pocketed good money and they've gotten away with it. And if they thought your loan was "risk free," how come they were charging you so much more than the interest on Treasury bonds? If you're only a small amount underwater on your mortgage, it's probably the case that you're going to be better off staying put. But if you are deeply underwater, it's a different matter. Whether we like it or not, walking away from debts is as American as apple pie. Companies file for bankruptcy all the time, and their lenders eat the losses. Executives and investors pocketed millions from the likes of Washington Mutual, Lehman Brothers and Bear Stearns when the going was good. They didn't have to give back one cent of that money when the companies went into bankruptcy. Limited liability, after all, is one of the main reasons every business from your local dry-cleaner to a major multinational gets incorporated in the first place. They're not shy about protecting themselves if things go wrong. You shouldn't be either. --- In FairfieldLife@yahoogroups.com, "do.rflex" <do.rf...@...> wrote: > > > > WASHINGTON The number of buyers who agreed to purchase previously > occupied homes rose sharply in February, far exceeding expectations, in a > sign that the housing market may be coming back from the winter doldrums. > > The National Association of Realtors said Monday its seasonally adjusted > index of sales agreements rose 8.2 percent from January to a February reading > of 97.6. January's reading was revised slightly downward to 90.2. > > The report "may signal the early stages of a second surge of home sales this > spring," said Lawrence Yun, the trade group's chief economist. > > Economists surveyed by Thomson Reuters had expected the index would fall > slightly to 90.3. The index is considered a barometer for future sales > activity because there is typically a one- to two- month lag between a signed > sales contract and a completed deal. > > A reading of 100 is equal to the level of sales activity in 2001, when > the index started. > > Home sales had been sluggish during the winter, partly because shoppers felt > less rushed after lawmakers extended the deadline to qualify a tax credit. > First-time buyers can get a tax break of up to $8,000 if they sign a contract > by April 30. Lawmakers also added credit of $6,500 for existing homeowners > who move. > > The biggest month-to-month increase was in the Midwest, where pending > sales rose by nearly 22 percent. Sales posted gains of 9 percent gains > in the South and Northeast, but fell nearly 5 percent in the West. > > ~ Associated Press: > http://www.google.com/hostednews/ap/article/ALeqM5jljsJcu7uX4H65Rj0zDRmPQvMEQAD9ESUU9G0 >
