Mortgage Default Information

Understanding the Housing 'Walk Away' Threat and Measuring Its Risk

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In Brief...

The "strategic default" or "walk away" is the final hurdle housing must get over. " By "price dependent" we mean that if home prices go down, greater negative equity is created, so "walk aways" and foreclosures increase. Researchers don't know the exact relationship between negative equity and walk aways. Some researchers have discovered it doesn't become an issue until negative equity is about 20%. For example, the first red category shows that 1,350 homes have equity from zero to -10%. Step 3 - Recalculate the "Home Equity Spectrum" After a Price Decline. This sum indicates that 328 more homeowners per 10,000 will probably walk because of the 10% drop in home prices last quarter.. This risk doesn't exist in all areas, only in areas with high "months of sales," large shadow inventories and negative equity. There seems to be a tipping point of sustainability; when its passed the decline continues on its own. In other areas the price decline won't be self sustaining and it slowly stops on its own.. In the example above, when prices dropped 10%, 1400 per 10,000 homeowners lost down payments and are taken out of the buyer pool..

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