Our townhouse is now listing for 95k LESS than what we paid three years ago. I could rent the same unit next door for $1200/month less than I pay in mortgage.
What happens if I just leave my keys on the counter and walk away?
Bad credit of course but what else? Do they come after your remaining assets like repo your car(s) or nose around in your bank account?
I feel like I’m paying for other people’s mistakes and/or greed, and I’m starting to get tired of it.
Look at your promissory note and deed of trust (whatever it’s called in your state) to see what they can do about the deficiency. More than likely, the bank can come after you for the difference between the balance on your loan and what they can sell your house for.
However, it would be a seriously dick move for you to abandon your loan if you can pay it, just because you’re pissed it depreciated. Other people will pay for YOUR greed and irresponsibility.
On one hand I agree, but on the other I have to wonder how long (10 years?!) I will be forced to put things on hold due to the market. For example: My wife and I bought a townhouse in a metro-area without intending to have a child. Now, we are the proud parents of a 15-month old baby girl. That changes things. We’d prefer to live in a larger, safer and more secluded area - but we have no ability to move thanks to the market and the declining value of our home.
What if my wife wanted to stay home and take care of our daughter instead of being forced to work in order to make the extra $ needed? Are we unable to do that until our daughter is 10 years old?
Shouldn’t have squirted out a baby.
It’ll screw your credit rating, but at least in the United States that’s about it.
No. They get the house and your credit takes a hit, that’s it.
Looks like you can wind up being liable for taxes on “income” (basically what the bank says that you made off of the deal by not paying.)
http://www.searchlightcrusade.net/2006/11/what_happens_when_you_cant_mak.html
Correct me if I’m wrong (from Canada, so not really sure) but you’re going to have a tough time getting a larger house if you walk away from your current one (unless you have enough liquid to pay for it).
What bank in their right mind would give a mortgage to someone who walked away from their last mortgage?
For sure, you’d have to rent for years before you secure a loan again.
I’ve typed up 3 different replies and then deleted them.
I just don’t even know what to say.
Why do you feel like you’re paying for other peoples’ mistakes? Did someone force you to buy the house? Did you for some reason believe that house prices could somehow increase indefinitely in defiance of the laws of physics? Did you even look at the cost of the house as a percentage of cost of living, relative to historical averages, when you bought it?
Do you think that there exists any kind of asset that is guaranteed to only increase in value over time? At all?
When I bought the house I assumed that it would not drop in value. That’s it. That theory was based on the historical data of the US housing market.
If it were worth exactly what I paid for it I’d have no ill will towards the market.
You do know why the market has crashed right? You don’t think someone has a right to be angry that a select few made millions / billions of dollars and now average folks are forced to pick up the tab?
You believed a “theory” that states that housing prices always go up? How long is the term of your mortgage? You were willing to go into 10, 15, or even 30 years of debt based on a premise that, when you sit down and think about it for ten minutes, doesn’t make any sense at all?
Or if pictures work better, here are some graphs you could have looked at:
http://mysite.verizon.net/vodkajim/housingbubble/
http://www.goodevalue.com/wp-content/uploads/2008/04/pimco.jpg
(Of course articles with headlines like these did not exist in 2005, but the equivalent graphs sure did).
I have some ideas about why the market has crashed, but I don’t think that ultimately it has very much with “a select few”. Yes, some scumbags on Wall Street made a bunch of money that they didn’t deserve. That doesn’t make you buying your house in 2005 (look at those graphs!) a non-bad decision.
Well, there’s not much that I can say to that. :) No, I didn’t look at any graphs in '06. You win. I suppose I’ve learned a hard lesson that I’ll have to pass on to my girl when she grows up.
But seriously, on the subject of the financial crash when it comes to the economy as a whole (not just housing prices, which clearly had to come down and still have a ways to go), I don’t think any of the mainstream explanations hold water.
Here is one explanation that makes perfect sense and which I have seen few people discussing:
http://www.theoildrum.com/node/4899
Steve Ballmer said a similar thing in an interview over the past couple of weeks (can’t find the link right now) and it was just glossed over by the interviewer.
The in-plain-words summary being that our economic habit is to fool ourselves into thinking that a lot more money exists than really does. That amount of fake money just gets bigger and bigger over time, until at some point there is so much fake money compared to real wealth that the situation just unravels (due to lack of faith in the fake money’s ability to be traded for real wealth).
Wall Street certainly loves unhampered creation of fake money since that always makes them richer, but the problem is systemic and pretty much everyone is at fault. Including the guy on “Main Street” who has bought the line that credit comes from debt rather than savings.
An excellent summary of how we got here:
I say walk away if that’s in your best financial interest. You have to look at how the bad credit will affect you though. That’s what big business would do or has done with tax payer dollars. Don’t worry about honor, worry about your bottom line. That’s business and the people that took your loan know it.
Just do your research before you walk away, because you don’t want to get into a worse mess.
This is baloney. Yes, everybody involved in the housing crash has some fault, but the degree of fault is different. The people that dismantled protections (like existing bucketshop laws) hold much more responsibility for the collapse of the financial system than people that just participated in the housing bubble.
The degree of fault is different, sure, but we don’t even know what it is, given that people who profess to know economics failed to model what has happened and cannot even now come to any kind of consensus on what is happening.
But forget houses for a minute, as those are just one small aspect of the issue. Don’t you think that it’s bad that we have a culture of severe debt? Whose fault is that exactly?
I’ve always felt that the idea of a 15-year mortgage is a really bad one, and the idea of a 30-year mortgage is just ridiculous, yet people sign these things all the time. Because hey, if you hide the idea that it’s a giant debt and money hole, and instead talk to people about how they are “building equity” and make it seem very positive, they’ll love it! Well, okay, there’s a sales job going on there, but whose fault is it that the sales job has worked so well?
Yes, we can. Their models didn’t predict the housing market going down. They all bet on housing, most of whom bet on that bet and then sold those. They all lost their bets, but because there’s no “house” keeping track who owes how much to whom, no one knows how bad the damage really is, and no one wants to find out because their share prices will drop like rocks. And since all their bets are a tangled web of greed, when one person fails, it causes other people’s bets to fail because everyone was betting on the success of each other’s bets.
There’s no easy fix, but how we got here is pretty clear. The only people that are in denial are conservatives who want to blame poor people or the government.
And yes, there were economists that predicted it.
But forget houses for a minute, as those are just one small aspect of the issue. Don’t you think that it’s bad that we have a culture of severe debt? Whose fault is that exactly?
I’ve always felt that the idea of a 15-year mortgage is a really bad one, and the idea of a 30-year mortgage is just ridiculous, yet people sign these things all the time. Because hey, if you hide the idea that it’s a giant debt and money hole, and instead talk to people about how they are “building equity” and make it seem very positive, they’ll love it! Well, okay, there’s a sales job going on there, but whose fault is it that the sales job has worked so well?
I thought we were forgetting housing? You know how much damage I can do? I might be able to cause someone to lose fifty thousand dollars. How much money can Merrill Lynch lose?
Ultimately marketing works Jon. Yes, you can blame people for falling for it, but statistically, it works. It will always work. Those who control the messages, control behavior and there’s money to be made by turning people into debt slaves. We are sheep. I’m a sheep, “Baaaahhhhh.” That’s never going to change. You’re blaming the sheep for being led to slaughterhouse, rather than the shepherd for taking them there.
But I know, you’re different. You’re rational and independent.
Uhh, I don’t think I would ever describe myself as rational. Independent, sure. Ad hominem much?
Getting back to the point – yes, marketing works a lot of the time on a lot of people. So I guess you’re saying that there is someone out there who is marketing the culture of debt in such a concentrated fashion that they are more to blame than the people assuming the debt. I don’t feel that way, really. I certainly tend to dislike marketing and PR-type people, but if someone is going to just up and believe that he can get free money by buying something now and selling it again later when it’s worth more, and that in fact he doesn’t need to do anything productive or increase the standard of living for anyone anywhere in the world to gain wealth – he can just consume all this nice food and luxury goods that other people are working hard to produce, simply because he bought something at time t0 and sold it at time t1 – and he believes all this so easily because it appeals to his innate laziness and greed – then am I supposed to feel better about that guy than the marketing guy? Am I supposed to accord him some mitigated degree of blame? Well, I don’t!