Should You Stay in Your Home or Walk

You are upside down in your mortgage. You will never claw back that hundred grand in lost equity. You say well this is my home. Your taxes are high. They will never come down. Your mortgage is high and worse you cannot refinance because your house is inverted. You are stuck in an over valued asset that is bleeding you dry and you are on the same footing as a renter. In fact it is worse than a renter. You owe the bank for the full amount of your mortgage. A phantom tied to a value that vanished five years ago. Should you stay or go?

Ten million people are facing this dilemma. When rich people have a bad investment they walk. Middle class  morality does not exist .But for the millions stuck in upside down homes there is really only two options .Keep paying on a depreciating asset if you can or you walk out of your house and start over. A short sale perhaps. A deed in Lieu (give it back to the bank) Or good old foreclosure where you get to squat for a couple years before your house goes to auction.

These are the options for a large segment of the population and none of them are good. Walk and your credit is trashed. Stay and have nothing to show. Strategic default is what they call walking now. Jingle Mail. Everyone one has to face this one and figure out their own bailout plan. But sitting will only work so long. If you take your medicine then you can start over. Don't take your medicine and stick it out and hope values could come back. Not likely.

So there it is. Stay or Go. The medicine is bitter but waiting only prolongs the disease.

Rocket Man...the American dream upside down

 

The I Can't Move Generation

Everyone has their cross to bear and for the recession generation of homeowners it is this: they can't afford to move. It used to be you moved to improve your situation. In the old paradyme one moved to a bigger home to take advantage of the increase in equity from the market. Trading up. This was a no brainer. You found out your house had appreciated by a hundred grand and went house shopping. You  found your next dream home then sold your current home and took on a bigger payment but it all came out in the wash because you would get a bigger chunk of equity as the market moved again. Then it all came crashing down.

In the smoking ruins of the bust the housing market is on it's head. Take the homeowner today who wants to sell. He can't because his house is now in a negative equity situation. He owes more than it is worth. There is nothing to plunk down on the next house. But let's say the house is not underwater and he wants to sell. There is still no guarantee it will sell and worse there is no guarantee there is another house out there. This is the kamikaze element to moving now. You might find yourself out in the street because you cant qualify for the next house.

So nobody moves now. People move for a variety of reasons. The big one now is downsizing. No one wants the big house anymore. Most people want to cut costs, but here is the irony of the housing bust: you can't afford to move to a smaller home. The smaller home might cost you more because you will lose all the evaporated equity in your current house. Much like a stock you don't lose until you sell. There is a chance it might come back right? Right.

But lets say you are going full speed ahead. You literally have to proceed like a blind man. You don't even look at the new house. You can only concentrate on selling yours and make peace that you may not get a penny out of it. Then you look for a new home and you have to make peace with the fact you could well end up renting. Because qualifying with no down payment is just about impossible now. So nobody moves.

Who is moving then? The people who get foreclosed. The strategic defaulters who quit paying. The wealthy who walk from their home and buy the next one with cash. The rest of us sit and wait for the next bubble.

http://www.billhazelgrove.com/
Rocket Man...keeping your house shouldn't be this hard