Tuesday, Aug 11, 2009
Strategic Defaults
DailyWealth: My Friend Can't Wait to Default on His Mortgage
Story from Las Vegas, Sin City. "My friend and his wife can comfortably afford their monthly mortgage payment. But they may stop paying anyway....By defaulting on his loan, he'll save himself over a hundred thousand dollars... and still own a home.
"Everyone's doing it," says my friend. "I know three other people who are doing [strategic defaults] too," he says. "They're buying bigger houses with lower monthly payments. And that's just from my work..."
Posted by mountain goat @ 12:50 PM (1264 views) Add Comment
7 Comments
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1. mark said...
it is not a buyers market in Las Vegas, I know this for sure, the banks currently hold 40,000+ properties on their books, they are empty, they have been foreclosed, but the banks won't put them on the market, hoping to drip feed them to keep prices high, yet with the pending threat of more foreclosures, then the backs will have to offload very soon, thus prices could drop 20% more
2. lenny said...
I spent a good few weeks looking at properties in different parts of Las Vegas last Autumn and was glad I didn't buy then. I agree with Mark about the chance further 20% collapse in prices. A Realtor in Vegas emails me articles regularly and although investors are busy buying up foreclosures, the median prices are still dropping.
The banks can't hold on for long because they are liable to pay the property tax on the foreclosures. Also with the extremely high temperatures, the Air Conditioning in most of the empty properties is left on 8 to 9 months a year set to maintain a temperature that will stop damage occuring.
I had decided not to buy there but may change my mind now if this further decline in prices does happen. A good size 3 bed house on a golf course community with excellent amenities are selling for $160k now and my US Dollars were purchased at a rate of $2.01 in July '08.
Will be a good deal as long as they still have water......
3. icarus said...
@ mark - is that 40,000+ foreclosed/not for sale properties in Las Vegas (metropoltan area) alone? I thought the figure for properties in this bracket for the whole of the US was 6 or 700,000. That would make LV responsible for 6% or 1 in 17 of these properties. Sounds high.
4. uncle tom said...
Talking to my friends here in the US mid-west, there seems to be a divide emerging between the urban population, and those living in smaller communities.
Small town America feels it has dealt with the recession and wants to move on, but also feels that through mortgage defaults and federal stimulus packages, the more leftward leaning urbanites are now screwing them, and the economy generally.
There is a strong sense that the healthcare reforms will benefit the urban population to the exclusion of those in rural areas. Whether true or not, the mood here is very distrusting..
5. mark said...
icarus, a friend of mine is a senior banker in wells fargo, the 40,000+ is true, they are bank owned and the banks are trying to drip feed them into the system, in our place in vegas, most of our neighbours have been foreclosed, there are a lot of empty properties over there...
that figure is for LV, Henderson, Summerlin, (Rhodes Ranch has been very badly hit, but still very overvalued) etc, you have to remember how fast it grew over the past 10 years...
yes it is high hence why vegas pretty much tops the lists
6. icarus said...
mark - it means either (1) LV foreclosures/not for sale is about 10 times what you'd expect on the basis of population (LV metro area about 2m pop) or (2) that 6 - 700,000 figure @3 is far too low.
7. mountain goat said...
"Almost one-quarter of U.S. mortgage holders owed more than their homes were worth in the second quarter and that figure may rise to as much as 30 percent by mid-2010 as job losses and foreclosures climb, Zillow.com said. " - Bloomberg - http://www.bloomberg.com/apps/news?pid=20601087&sid=a2p_zMYkFQFg