Reprinted from preppernation.com
"Just Walk Away…?"
I think I already know the answer to this but I'll ask anyway... Anyone late on their mortgage? I don't mean like you forgot and the check didn't get out on time. I mean LATE on your mortgage and it's only a matter of time until you don't live there anymore? I see a few hands, actually quite a few!
It's not that I actually did see your hands go up but since I work in the industry and can see first hand everyday what our current real estate market is really doing. Let me say that it's a mess and I don't see anything to give an indication that it will be making even a slight recovery anytime soon. I see MANY home sellers come through my door that are behind to VERY behind on their house payments. I also see another group of folks and its that group I was going to discuss today...
Let me describe the situation that I'm hearing from this group of homeowners on an almost daily basis. They are living in a home that they purchased 3-5 years ago. This home is average by most peoples standards, meaning that it's in a decent neighborhood and of the typical size for most families. They have taken good care of the place and made significant upgrades since moving in. They almost all made minimal down payments but had equity building right out of the gate. They were content to stay living there the last few years and watch the housing market decline as they all had hoped that it would turn around before they were ready to sell and move at some point in the future.
As additional background information, they are current on their mortgage payments. Most haven't lost their job or experienced a significant drop in pay. At least for the time being they can afford to continue living in their current homes. What they have seen a drop in is their homes value! Not a small drop but a very large chunk of value that is just gone...
I know what you're thinking - you buy a home and can hope the value will increase but there isn't any guarantee! I agree, you purchase a house and hope for the best. Well, hoping it will increase in value is one thing but a significant decrease in value is something else all together. This is what too many folks are facing today. This situation can be acceptable for a time but in the long run we have a population that is very mobile, how long do you think they are going to stay put waiting for this market to turn around. I say it isn't for much longer...
I would be tempted to say that this is my educated guess but that wouldn't be quite right. These people have told me that if this doesn't rebound then they will have to just walk away. They're backwards in the home and see no other alternative? Why should they stick it out and how long should they stay?
What would you do? I say this in a broad way even though I do know that there are readers here who are in this exact situation. Did anyone plan for this recession? Is there any other option to walking away? I will hazard the email trolls wrath and bring up the moral issues surrounding this...
Didn't every single one of these people sign a Mortgage Note promising to repay the lenders money with interest over a period of time, typically 30 years? Why would anyone think that after making that commitment they could in good conscience, just walk away? I choose to believe what I was taught about our nation being built on a handshake. A man's word was his bond and all those other catchy one liners grandpa used to say... How does walking out on a mortgage get reconciled against what we were taught about a keeping our commitments?
Speaking for myself, I get pretty upset when our politicians don't keep their commitments... Which is almost 100% of the time!! So, how as American citizens can we hold ourselves to a lower standard? Is it possible that this situation is self perpetuating and before long no one's word will be worth enough to even bother writing it down? Anyone have an answer?
I don't have the answer and this situation is worrisome to say the least. Please understand, I do know that there are families that are losing their homes and they have no financial choice but to walk away. That's a sad fact but I'm not talking about those people. There will always be things that happen in life that we must all just roll with, a foreclosure isn't the end of the world. My concern is the people that can still pay but are walking away because they have lost any incentive to pay. Believe me, if this continues I may be joining their ranks... Not the walking away part but the no incentive to pay part.
Is it acceptable to expect a person to stick it out for however long it takes for the real estate market to turn around. What if that doesn't happen and I don't think it will - in case anyone wanted my opinion. Maybe we should ask everyone to sit tight for 2 extra years past when they wanted to sell their property? What if they were required to list their home for sale for 5 years before we would allow them to walk away? What if the government decided that until you could sell your home, they wouldn't allow you to move - even if you couldn't pay the mortgage?
Just when all of us DOOMERS thought we had seen about every possible slippery slope out there, I bring you this. There will be or at least may be some folks out there that this situation can't touch but there aren't many! Only if your home is paid for free and clear or at least paid WAY down are you able to avoid ever being put in this position.
What I'm driving at here is we are facing a snowball effect. The big problem with the current real estate market is the declining prices. It doesn't matter if you're the family that can't pay the mortgage or the one who can and chooses not to. That home is going to be foreclosed on and attempted to be sold by the bank. I know that we are all familiar with the supply and demand concept... The more inventory out there, the lower the prices go. The lower the prices go, the more families that will face the "Walk Away" choice. I for one am not going to place much hope in my neighbors making the choice to honor their mortgage agreement on principle, are you?
So, what do you do? If you haven't already had to contemplate this situation, get ready to. What will you do? What other choice do you have? Some people can't wait to sell, they have to move because of some outside influence says they do. You know an employer, military or family obligation. That list could go on and on but the outcome is going to be the same... Lower home values! Maybe you disagree with me? Please email me as I would like very much like to print a retraction on this depressing subject!
Is it possible the government analysts have seen this time-bomb coming? I don't see how they could miss it, I'm not the sharpest knife in the drawer and I see it. We've witnessed continual poor choices being made with our economy and I doubt that's going to change anytime soon. If they know this is happening and only going to get worse... What will they do to TRY to stop it? I think that this is correct question we all need to be asking ourselves. Will we have the option of getting off this train-wreck without "Just walking away"?
Sorry to be so pessimistic today! I think anyone that's a home owner and has the slightest idea they might want to move away in the coming years had better start thinking about an exit strategy. We plan for so many things but I doubt very many "preppers" have thought this particular DISASTER through... Might be a good time to be a renter? Just my opinion, take it for what it's worth...