According to this New York Times article: (Click here to read), the following is taking place:
More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.
The article goes on to say that only 1 in 12 below the million dollar mark is deliquent!
Okay, so perhaps the rich aren’t out on the streets… In fact, usually it’s a 2nd home or a rental property that they are delinquent with the payment…
The article states that the Rich are more ruthless. Actually first, I’m sure if “us, less than rich folks” had a 2nd house or rental property, we would consider unloading it too, especially if we were losing money on it.
Second, I think since the government is attacking this social class, they no longer feel obligated to do what is best for the economy or government. After all, they are being secretly or blatantly (depending on your viewpoint), attacked from the government. So why care, since they are being view as the bad guys anyway.
Mostly, I think they see it as a bad investment that no longer makes sense though.
I initially was going to write this post around the fact that strategic defaulters are bad, and I would take the high road and stick it out. But, since the 2nd home or rental property is really an investment… Now, I’m not so sure! I would like to think I’d do the right thing, but they are losing money on these investment, and the government is kicking them while they are losing that money…
Readers, what would you do if you have a 2nd home or rental property in a place like Las Vegas (where the value of homes have practically halved)?
-MR
Personally, I would probably just suck it up and hope that housing prices would improve if I had held onto the property this long. I just can’t see myself walking away from something that I got myself into, full knowing that prices may fall, which is true with every investment. (Stocks are easier to sell than a home though.)
I can say, it is getting a little old listening how the rich will be the only ones affected for this tax increase and that tax increase. I don’t know why the ‘rich’ have to be so hated when they provide so much economic stimulus in this country.
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This is a hard call. If they walk away, they might be able to claim bankruptcy and ruin their credit for seven years. However, if they are truly cash-rich, maybe they don’t care. My guess is that they aren’t cash-rich, which is why they are struggling with the payments. If they can stick it out, they will probably benefit in the long run. But, the problem is that they can’t make the payments. It’s a catch-22!
I’d never buy a house that I couldn’t afford. If I paid $500,000 for a home, I’d make sure I could afford the payments even if my husband or I became unemployed and we’d have a big enough emergency fund to cover at least 6 months of payments if we both were laid off at the same time.
It’s hard for me to feel bad for the rich or the poor when house values fall…if it was worth $500k to you when prices were going up, it should be worth paying off even if values fall. I cannot support “strategic” defaulters no matter what their economic class.
regardless of if it is your 1st, 2nd or 3rd home you have to do what is best for you. the last thing you want to do is default, with this comes a huge liability of credit implications. if you have a second home good for you, sell it or rent it out to ensure that you still end up on top at the end of the year.
this is a dog eat dog world and you have to do what is best for you and your family.
@everyday tips
I actually agree on the mortgage, a contract is a contract. Plus, like you say, the prices might rebound in a few years…
I feel exactly the same way about the rest of your comment 🙂
@Little House
There is definitely that faction that overextended their purchase. Probably based on the myth that buy as much house as you can afford because your salary will keep increasing.
Surprise, not always…
@Budgeting in the Fun Stuff
I agree, I’ve actually blogged about the “Strategic Defaulters” in the past. The are a selfish bunch that has kept the economy in the dumps for way too long… While they didn’t cause the initial downturn, they are making it last way too long.
@James
The guy I am today, basically said it flat out wrong! But if I were richer and in their position, and had to work very hard to get there. My attitude might change! And with the way the government is acting towards the rich, that would definitely make me mad if I were them.
I don’t think the government really gets it. People live well because of jobs and being employed. If the government attacks the employers, they go overseas…
I did a press release on this early this year. I ran a report through our database and found that the bluechip suburbs were the ones who owed the most. While you tend to think of the expensive suburbs full of rich people doing well, they’re full of people with big incomes but large mortgages and big credit card bills