Friday, February 12, 2010

An Important Note About Mortgage Defaults

Yes, it is a powerful force in our market -- particularly in a community like Laveen, where we have grown so rapidly in the last five years, and then seen our property values decline due to foreclosures and short sales.  Those housing bubble years are having a devastating impact on our home values, as has been officially reported by the Maricopa County Assessor.

But another debate has also arisen out of this situation, and that is whether it is acceptable to strategically default on a home loan that you could otherwise afford but choose not to any longer.  Recently, a UA law professor wrote a paper titled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis," which raised the question of why more Americans are not behaving in their rightful economic best interests.


I find this debate absolutely fascinating, and furthermore see it as the necessary dialog that can foment a true recovery,  not just reestablishing growth but also promoting the right kinds of value-creating behavior for a sustainable economy.  That's why I've started cataloging my various discussions on the matter over at my other oft neglected blog.  Please click the link and let me know your thoughts on the matter.  There's some great stuff there, including links to the Motley Fool's compelling coverage, along with that of ABC News and our own AZ Republic.

3 comments:

Ben said...

Saw that you were quoted in a recent azcentral.com article. Good job, prolific blogger!

Patrick said...

Yeah.... I guess that I've been making the rounds, as I'm a little obsessed about the topic and still a wannabe academic in the field of economic research. And btw, please don't confuse my "principle" vs "principal" quote as espousing hate for the banks (there are far better ways to make that argument), but I do think that we need to come to terms with the new realities of our housing market. The more people who assess their current economic situation and evaluate the net present value of one course of action over another (paying mortgage or walking, renting or owning, and so on), the more we will learn about why many people ought to walk. It's a very personal decision, but we're all in the same tough market; and I strongly disagree with the "professionals" who feel that foreclosures happening earlier rather than later (since this is the likely scenario for most) will do us all great harm, as they argue.

Patrick said...

And by the way, I've updated the conversation on my other blog: http://bit.ly/9cmcLE. And I've got a great comment on the older article as well, from a homeowner who apparently entered the market in much the same way that I did.