We've heard mixed stories about the effect of being "underwater" on home equity. We've heard that owners are likely to walk away, leaving the keys and moving on, and we've heard that it makes little sense to bail out on even a deeply underwater mortgage. It seems the former view has taken widespread hold as "walkaways" spike.
While others persist in draining savings and running up credit card debt in a last-ditch bid to save their homes, a growing number see no point in making boom-level mortgage payments in a bust market -- with no bottom in sight.
"People are hurting," said Barnard, who includes himself in that group. "They're scared or they're angry,"
In California's Inland Empire east of Los Angeles, where Barnard lives and sells real estate, median home values have plunged more than 40 percent in the last year as formerly sidelined buyers snapped up foreclosed properties.
Those bank-owned homes moved at fire-sale prices that decimated the value of neighboring homes -- many of which are owned by people who have limited "skin in the game" because they put little or no money down at purchase.
The cascade effects of a few "abandons" in the neighborhood tend to set up a few more, and, contrary to the more optimistic gesticulations of some observers, this suggests that the housing crash is long from over.
Owners skulking away from "underwater" U.S. homes [Reuters]