Comment by dastbe
6 days ago
> In non-recourse states, you'd expect to see defaults as people leave the keys in the mail to reduce their housing costs by moving next door at the reduced price or rent. More broadly, people don't like seeing their wealth go down.
At the trade-off of never being able to get a mortgage again, unless that's the bailout these homeowners get. Almost everyone will either sit tight or rent/sell at a loss. That being said, you will lose out on the public and private support of everyone who bought a house since roughly 2020. It doesn't matter if you've got a 3% rate if you're not getting your down payment out of the house.
The plan that makes the most sense to me is to keep housing prices constant/barely increasing while letting 3% inflation and gradual lowering of interest rates do its thing. Eventually the houses won't seem that expensive and those who locked in at high rates and high prices have an offramp through refinancing.
> At the trade-off of never being able to get a mortgage again
That's not the effect of abandoning a mortgage (or using the leverage provided by that option to secure lender approval for a short sale) in a non-recourse state.
(Source: been there, done that, have a new mortgage since.)
The costs and hassle of moving kept me in an underwater house that I mathematically should have walked on; eventually it wasn’t underwater and the mortgage was paid the entire time because I couldn’t be arsed to move.
The potential credit hit wasn’t even a consideration.