The news this week was not good for the housing market. The price of homes keeps falling. Experts say this may not get much better in 2011. A large percentage of Americans are living in homes that are worth less than their mortgage. But, they still pay the mortgage on time. This group is hoping the housing market will turn around and their homes will go back up in value. Unlike the millions who just quit paying the mortgage.
USA Today had an article about this week about people who just quit paying. One man in Scottsdale, Arizona, quit paying, walked away, and moved into a better condo in the same complex with rent much less than the mortgage payment.
Here’s the dilemma as I see it for 2011. Many Americans who are still paying the mortgage are barely scraping by. One member of the household may have lost a job. They are trying to make ends meet on one income and unemployment. There are no extra dollars in the budget.
Several things seem sure for 2011. Food prices are going to be much higher. It’s already happening. Property taxes may be much higher in many locales. Cities are strapped and need more revenue. Gasoline prices are higher. Thanks to Obama and the EPA utility costs will be higher in 2011. As the EPA enacts Cap and Tax through regulation, mandated solar and wind power will raise utility bills across the country.
With all this, how does that family on the cusp of deficit spending pay the mortgage? My guess, many will say, it’s over. Let’s just stop paying the mortgage, stay here free for a year or two until the bank throws us out, and rent that vacant house next door for 50% of what we are paying on the mortgage. We can save a lot of money while the bank goes through the foreclosure process, living here free, and when we have to go, find a bargain.
What incentive exists to keep paying the mortgage? Their equity is all gone. If and when the housing market is looking better, they can buy another house, and in the interim, they can find shelter at a rent they can afford.
The inflation we are going to see in 2011 will insure more and more Americans pack it in and more and more houses are in foreclosure.
