For those of you that are not familiar with the term "strategic default" here it is- The decision by home owners who are currently upside down on their mortgages, that have no problem continuing to pay are just throwing up their hands and walking away from their homes. They are choosing to pay off credit cards, cars and other debt. The idea is by walking away from a home that they can not make a profit off of for the next several years, will put them in a better financial position by doing a short sale on their current home. They will then turn around and buy another home when their credit is repaired. Thus cutting their debt and their payment all at the same time.
If this becomes more popular as the option arms in 2010 and 2011 come due it will make the housing recovery slow even more. The current statistics in Minnesota is 29%of home owners are currently under water and owe more than their home is worth. I believe a home is similar to a stock in that it will go up, it will go down. The thing to remember is that the value is only an issue if you are selling at that moment. Walking away for no reason other than you don't want to pay anymore is poor judgement.
The home market is recovering but we are climbing out of a huge hole. That takes time and it doesn't just happen overnight. Hopefully this is not a new trend and just a small group of home owners that don't get it.
As always please consult a real estate attorney with any legal questions you may have and your accountant for any tax questions.
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