Anyone Else At The Panic Point On The Dollar?

[mtgordon]

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Take your average Joe with good credit who either recently bought a home, or took out a loan against his equity to buy a car or something. In 2006 his place was worth $300k, so he took out loans for $295k. Now in the current market he can only sell his place for $270k, a 10% decline which is common in a lot of western markets like CA, AZ, and NV. He has a choice since his house is $25,000 under water. He can eat the loss himself and pay off the full amount of the loan or dump his credit rating and his $25k loss on the bank.


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Cal me crazy but why "must" he sell his home? It is only a paper loss at this point, everyday people don't sit down every evening after dinner and say "WOW, I just read the newspaper and it said we lost $30,000 dollars today honey, no more steak and eggs".

Jimbo

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And I think people don't think about the fact that he can then turn around a buy the same type of house for $270k. Sure he's out the 25k from before but he can basically move from one town to another without increasing the size of his loan (once you account for buying/selling fees, etc. I think the only people that are in trouble are those that can't afford the loans they have and they were in trouble no matter what.