A recent study has emerged profiling homeowners who have voluntarily defaulted on their mortgages. According to the study from Northwestern University and the University of Chicago, as many as 1 in 4 homeowners walked away from their homes, “despite the ability to make mortgage payments.”
The study titled, “Moral and Social Constraints to Strategic Defaults,” found that declining home values was a significant factor in increased defaults, surprisingly much more influential than that of job loss.
Another interesting finding was that as defaults increased, so did the likelihood that a homeowner would consider “walking away.” The study concluded this reaction was a result of a reduction in the social stigma associated with foreclosures.
It seems that foreclosures, ’strategic’ or involuntarily, are here to stay, and perhaps these homeowner profiles should be utilized more when reporting on the doom and gloom of the foreclosure crisis. Rarely do you find reports or editorials pointing out the flaws from an individual, internal perspective, and rather always see the effects due to external or economic factors.
The truth is that a majority of homeowners got into this mess without reading real estate 101. Or perhaps did not have an understanding of general market fluctuation. The number one rule in real estate is that it should be viewed as a long-term goal and not a short-term profit. This is where a number of homeowners went wrong.
Consider the study, 25% of homeowners despite being able to pay, simply did not want to make the long-term commitment. Now due to the “moral unconstraints” of flighty investors and homeowners the whole country must deal with an even larger dilemma- one where there is no easy scapegoat.