Game Theory & Strategic Default Should I stay or should I go now?If I go there will be troubleAnd if I stay it will be doubleSo you gotta let me knowShould I stay or should I go –The Clash, “Should I Stay or Should I Go?” lyrics As more homeowners nationally find themselves “underwater,” i.e.,...Read More
Strategic Default . . . Minus the Consequences Imagine you bought a house 4 years ago for $540,000, putting in a (very) modest 2% down payment, or $11,000, and borrowed the other $529,000. Today, your home was worth $180,000 (no, not a typo), yet you were still faced with making payments on the original $529,000...Read More
Not Exactly a Dream — But No More Nightmares Thanks to a rare confluence of factors — mortgages that far exceed home values and bargain-basement rents — a growing number of families are concluding that the new American dream home is a rental. Some are leaving behind their homes and mortgages right away, while others...Read More
Housing Market Math, Circa 2010 When does 2 – 1 = 0? When a two-income family that’s “upside down” on their mortgage loses one of those jobs (“upside down” is Realtor-speak for owing more on your home than it’s worth). The first wave of foreclosures largely consisted of marginal borrowers — putting very little (or...Read More
Social Stigma vs. Financial Self-Interest Across U.S., Food Stamp Use Soars and Stigma Fades –Headline, The New York Times (11/28/09) [A new academic paper] argues that far more of the estimated 15 million American homeowners who are underwater on their mortgages should stiff their lenders and take a hike. –Kenneth Harney, “The Moral Dimensions of...Read More
Future Foreclosures? 1 in 4 Borrowers Under Water –Headline, The Wall Street Journal (11/24/09) In truth, this isn’t just a headline in today’s Journal; it’s THE headline. As the accompanying story spells out, even the startling, 1-in-4 statistic understates things: in Nevada, Arizona, and Florida, the corresponding percentages are 65%, 48%, and 45%, respectively. As...Read More
