Just Walk Away, Renee…
“Just walk away, Renee, you won’t see me follow you back home…” If you’re a fan of the rippin’ retro Sixties, you may know the group Left Banke, who did a haunting, wistful song called “Walk Away, Renee.” Alas, however, the Mortgage Bankers Association tells us, a whole lotta homeowners (or, I guess, former homeowners) are doing that very thing.
Foreclosures in the U.S. hit an all-time high at the end of 2007, with borrowers holding adjustable-rate loans walking away from their homes even before the payments went up, Bloomberg reported, based on the MBA study released today.
Apparently, people are ditching their properties even before the interest rate goes up because they couldn’t afford the home in the first place, said Jay Brinkmann, vice president of economics and research for the industry organization.
Late payments have zoomed to a 23-year high, the MBA said.
Readers, help me out here. Put yourself in the shoes of someone who bought a house they couldn’t afford. Let’s say the clue bat has just descended upside your head, you came up short two months in a row and you know you can’t make the mortgage payment next month. What exactly do you DO?
Is there a smart thing to do at this point? Or at least a relatively smart thing? If you cannot imagine yourself doing something this stupid, what if you found out your best friend, or your mom (this actually happened to someone I know) has done it, and they need your advice?
Should they walk away? Should they contact the lender? Do you have to flee in the dark of night so the lender doesn’t find out?
And while we’re thinking about foreclosures and their effects, here’s a list of rather shocking price reductions in Antioch and Pittsburg, the areas of CoCo County hardest hit by the mortgage mess. It’s one thing when a luxury home takes a huge hit, but the first house here was $475,000 and dropped to $375,000.
634 Charleston Street, Pittsburg: 4 bedrooms/2.5 baths, 1,867 square feet, was $475,000, now $375,000. Fireplace, breakfast nook, back yard, lots of space. The listing does not say it’s a foreclosure, but does say there are “other disclosures,” and there’s no photo, always a quizzical sign.
1540 Freed Circle, Pittsburg: 3 bedrooms/2.5 baths, 1,535 sq ft, was $334,900, now $299,900. Unlike the preceding listing, this has photos, and though it’s a foreclosure, it’s quite clean and presentable inside and really pretty outside.
1600 Norton, Pittsburg: 2 bedrooms/1.5 baths, 1,757 sq ft. Was $355,000, now $305,000. No photo, always a worrisome sign, but the listing doesn’t say anything about foreclosures. Seems like the place could have promise, with all that square footage.
1550 Norton Street, Pittsburg: 2 bedrooms/1 bath, 864 sq ft, was $176,900, now $168,300. This is a really shocking price for the Bay Area. Admittedly, the house is a bit goofy-looking, at least to me, and it’s a foreclosure and the ad bear the ominous warning, “Just needs a little TLC,” which is a bad sign. But still, $168,300 in the Bay Area is a number I haven’t seen in about eight years.
Red said:
Smartest thing to do would be to save up first and last and deposit… Get a lease on that rental and mail the house keys to the bank.
March 7, 2008 5:02 PM
Janis Mara said:
Red! Nice to see from you again! So, get yourself all set up in the new place and skedaddle, eh? I believe there’s a fairly long time window between when the first default (late) notice goes out and they come to evict you, yes?
March 7, 2008 9:58 PM
David said:
Yep. So save the money and get ready to move in the 6 months it takes to evict.
March 8, 2008 8:21 AM
david gordon said:
Don’t listen to Hank Paulson, that’s for sure! (He pleaded recently for homeowners to not walk away)
There are stories of people being able to stay in their homes more than 6 months and notices not even being mailed out to them. So, maybe up to a year. I don’t have data on that though, but have read several anecdotal reports.
I am encouraging a friend to do this very thing right now in Sacramento. She feels bad, but it’s not about feelings. It’s about making the best personal business decision. Feel sorry for the banks? Get serious.
Janis, I love this line!
“Let’s say the clue bat has just descended upside your head”
March 8, 2008 11:44 AM
Janis Mara said:
Feel sorry for the banks ahahahahaha! Indeed!
Man, I can’t imagine what it would be like to be living in a house you must leave because you can’t make the mortgage payment. Gak. Usually your home is the refuge to which you repair after a tough day dealing with the world.
Thanks for the good words, Mr. Gordon! For those who are newcomers to the wacky world of real estate, Hank Paulson is Secretary of the U.S. Treasury.
Among other things, on Feb. 14 Paulson stoutly maintained that there is no recession. I love this comment someone left on a New York Times blog: they said the current administration looks “like deer in the headlights” and the administration’s response to the housing/credit crisis is “worse than Katrina.” Check it out at http://theboard.blogs.nytimes.com/2008/03/06/the-housing-market-how-low-will-it-go/
And now, the question of the hour: Would you rather be a dishwasher or the current U.S. Secretary of the Treasury?
March 8, 2008 1:59 PM
David said:
Um. Secretary of the Treasury. Not the least of which because he got, as part of his offer, a massive tax break for switching out of his Goldman holdings into a blind trust (i.e. he got to sell millions of shares of GS and diversify without having to pay taxes on it).
But that’s a fringe benefit.
Anyway, no one calls recessions until it’s over. I doubt this one will be different. It’s never different. But clearly we’re in one, and it’ll probably last a bit longer than the last.
March 9, 2008 8:27 PM
Janis Mara said:
Well, now that you explain abouat the tax break, I withdraw the question
OTOH, dishwashers live every day with the knowledge that they are doing useful, tangible work cleaning up and restoring order, whereas the Secretary of the Treasury, well….
How long do you think this recession will last? The last one started in 2001 and lasted until 2004, or is it 2005, would you say?
March 10, 2008 9:07 PM
David said:
Well, officially the last one started in 2001 and was over by 2002.
I think this one will last longer; will be more like the early ’90’s, or longer than that (91-93, if I remember right). It’s kind of reminiscent of that, with a bit of the ’70’s stagflation thrown in for good measure. In the ’90’s we had a R.E. bust, S&L crisis, spiking oil and increased unemployment+McJobs. This time, the credit crunch is bigger, the R.E. bust is bigger, and oil has spiked up more. Jobs are just beginning to decline, so I think we have at least another 2 years to go. Personally, I don’t think we’ll see 2005 prices in R.E. for years; 2012-2014 at the earliest. We won’t see new stock market highs until 2011 at the earliest. And unemployment won’t reach 1999 highs until the Boomers retire. Hate to be so negative, but that’s what I see.
March 11, 2008 8:17 AM
Janis Mara said:
No, it’s not depressing, I think most people vastly prefer having some idea of what is in store, because then you can adjust to it and plan. Your analysis makes a lot of sense to me.
March 11, 2008 9:34 PM