Here in Chicago tonight, we're all singing "Here Come the Hawks . . . the Mighty Blackhawks . . . "
Sorry, Philly - Chicago Blackhawks in 6!
Back in the day . . . say, 2006 . . . few homeowners would consider simply walking away from their home, even if they couldn't keep up on their mortgage payments. Why should they? Likely, they could easily sell their homes at a small to modest profit, no matter their original equity position.
Fast forward to 2010 - a scant four years later!
For many, especially in the heavily-declining Florida Real Estate Market, home values have fallen 40% or more. Those who purchased with little money down during the Housing Boom are in a serious negative equity position - they are underwater, owing far more on their mortgage balance than the likely amount they could sell for today.
With little invested originally, the reality of having to bring considerable money to the table in order to close conventionally, and the often-mind-wrenching status of being out of work and unable to keep up with day-to-day living expenses, more and more underwater homeowners, it seems, are simply considering walking away these days.
In a study conducted by Harris Interactive, for Trulia and RealtyTrac, as reported by Paul Owers of the Orlando Sun-Sentinel, over 40% of distressed, underwater homeowners surveyed would consider leaving their home rather than working out a loan modification or other forbearance with their lenders.
The choice many have, it seems, is either to sell at a staggering loss, or simply stand pat, and not move, until the market improves. If they are not able, or not willing, to take either path, many have already decided to simply pack up and leave.
Rick Sharga, of RealtyTrac, a Foreclosure and Pre-Foreclosure Identification and Compilation Service, feels part of the frustration underwater homeowners harbor involves the callousness of their lenders toward their situation. Only a small percentage of troubled homeowners have qualified for loan modification or work-out programs. Many who have contacted their banks feel they are not sincere about helping them. Thus, they often harbor little guilt about pulling up and leaving, with the lender holding the bag.
The walk-away decision comes despite the considerable negative impact a foreclosure can have on a homeowner's credit score, as well as the old stigma of losing one's home to the bank.
Many economists don't expect the Real Estate Market in the most depressed areas - including the hard hit states of FL, CA, AZ, and NV - to improve dramatically for another two to three years. The prospect for home equity reversal, therefore, does not appear on the horizon near-term.
Further, RealtyTrac suggests high foreclosed and pre-foreclosure inventory is likely to continue for some time. The company has compiled a list of nearly 800,000 foreclosed, bank-owned properties. Fewer than 30% are currently on any local Multiple Listing Service, available for sale.
Here in Chicago?
Walk-aways are not rampant here as they may be in the most hard-hit Real Estate Markets. But, in some Chicago Neighborhoods and Suburbs, price drops from our market peak in 2006 have been in excess of 40% - especially true for certain Chicago Condominiums.
That could make desperation walk-away something more homeowners consider.
Please view our post today via BlogChicagoHomes.com.
DEAN MOSS & DEAN'S TEAM CHICAGO
Hi Dean, Walk-aways are the norm down here in SW Florida....I think we invented the "buy and bail" a few years ago before the banks caught on. As lousy as it is, I think the shame of losing ones house has disappeared and walk-away is considered a sound financial decision. just sad! jay
Thanks, Jay!
You know, it's easy for others to cast stones on folks in such a desperate situation.
But, if you think hard about what they have gone through, and the lack of sympathy from the banks, you begin to understand!
Thanks for the comment!
DEAN MOSS & DEAN'S TEAM CHICAGO
Nice perspective. Here in Sarasota and Bradenton I am sure that we have over the 44% of underwater home owners. I just finished a blog entry about 4 considerations if you are underwater in your home. In some of the areas that were all built in the 2003-2006 time period I would say that 2 out of 3 homes are underwater.
I do a lot of short sales here in Florida, and can say that there has been a remarkable increase in the bank's willingness to work with my distressed sellers. Hopefully this is a start of the banks increased involvement in getting homeowners that want to stay put, help they need.
Friday was a record day with 3 short sales getting approved! No deficencies for any of the borrowers. Last week two listings were withdrawn because their lenders approved substancial loan modifications too. that was a good week!
Dean,
I think it is important to include that IL is a recourse state. After the foreclosure the borrower is still liable for any deficiency. In Cali once they the house that's it.
The appreciation rates of the boom will never happen again.....if we're lucky.
Dean,
Your prediction came true with regards to the mighty Blackhawks! Congratulations!
It is nice to learn that the walk-aways are not rampant in Chicago and now that Chicago is home to the Stanley Cup Champions, they are likely to stay that way. I hope for your and your area that it will drop even more and that business will pick up with everyone being positively reinforced by the latest championship.
Far too many homeowners just walk away from the property and the mortgage, only to learn later that they should have done their homework and considered a short sale.