January 23, 2008

Calculated Risk: Wachovia: Homeowners just Walking Away Yow, the crazy thing about this housing crash is that you could see it coming from a couple miles (or years) away. But one thing I never anticipated was that all the no money down and interest only loans would mean that buyers had no commitment to the houses and would happily walk away when the payments turned into a drag. This actually might be a good thing though as historically housing declines are marked not by prices going down but by them becoming illiquid as people are unwilling to sell their homes at a loss. If they are willing to cut and run at least liquidity might return quicker...

from the comments on that link:
"In retrospect, getting a home loan in the last couple of years has been like going to a casino: play any game you like, no matter how risky; the house doesn't care, because the house always wins.

"So who bought, the last couple of years? A lot were gamblers and speculators, the kind of people who know how to cut their losses when things go bad. And let "the house" keep the house."

Posted by William Blaze at January 23, 2008 06:09 AM