It appears relative calm has descended on the long-suffering housing market, especially when it comes to price movement. For months now home values have shown signs of stability, and even moderate increases in some areas. Real estate observers of course like to see that but are generally unconvinced that a sustainable real estate recovery is imminent. Too many hazards remain in its way, among them the still notable oversupply, a weak job market and the potential of many more mortgage walk-aways.
Yes, that walk-away - a term that has finessed its way into today's popular real estate vocabulary - where a homeowner who can afford to make his home loan payments chooses instead to take a hike due to being severely upside down. This is the standard definition of it.
Walk-aways represent 15-35% of present delinquencies, according to housing industry estimates. The range is wide because it is hard to really figure out who can afford to make the mortgage payments and who can't. But really, what does it matter; walk-away is a walk-away regardless of the mortgage borrower's finances.
As things stand, the mortgage walk-away trend is likely to shift into a higher gear for the foreseeable future. There are quite a few reasons why so. Any intermediate-term price appreciation will be modest at best, leaving people in the suffocating embrace of negative equity for much longer than they feel comfortable with. They understandably start thinking of their options. If prices backtrack some more - as some real estate experts confidently predict - the decision will be easy. HAMP and other private mortgage provider modification programs are helping to some degree in alleviating pressures on struggling homeowners, but many don't qualify. They see an alternative in walk-aways.
In addition, the shame that has been associated with mortgage foreclosures and walk-aways is gradually dissipating. More people are tackling their distress from a financial survival standpoint instead of what the prevailing moral obligation calls for. They are making decisions based on what's best for them and their families. This is also made easier as mortgage lenders now are increasingly being perceived as being responsible for the housing wreckage.
These developments inevitably point toward the mortgage walk-away problem getting worse from here on out. For how long is impossible to say. It is going to cause trouble, however, for any durable real estate market turnaround hopes.
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Provided by:
Esko Kiuru
Mortgage, real estate and apartment industry analyst
www.BluefoxToday.com - syndicated mortgage, housing and property management blog
eskokiuru@gmail.com
My cell: 702-499-1006
