77% of first tuesday readers (103 voters) agree that negative equity keeps an underwater homeowner from relocating, but 23% of readers (30 voters) did not believe the lack of migration observed by the Carsey Institute and U.S. Census Bureau is a result of negative equity.
The Carsey Institute’s current data and analysis, which shows stagnant growth in once-booming states and metropolitan areas, lays to rest the argument that negative equity has no impact on homeowner (im)mobility.
With over 2,300,000 California homeowners owing more than the net market value of their homes on a sale at current prices, it is no surprise people are less likely to move. The lack of successful government intervention has left homeowners in migratory lockdown, unable to go where the jobs are. They have no refinancing or debt reduction prospects, which would have left them solvent with a credit rating sufficient to buy a replacement home. [For more information regarding the failure of government housing programs, see the November 2011 first tuesday article, HARP 2.0: Bringing band-aids to a war zone, the July 2011 first tuesday article, Relief for unemployed homeowners…big deal and the June 2011 first tuesday article, More bad news for HAMP.]
For those negative equity homeowners who need to get out of their homes and shed their black-hole asset, there is only one logical option: strategic default. If your lender is unwilling to grant a modification (don’t waste your time asking for a principal reduction), and you don’t qualify for government assistance (like those with a loan-to-value ratio (LTV) over 125% and most of the unemployed), exercise your trust deed’s put-option; default and force your lender to take back your home through a foreclosure sale. Remember: it’s not personal, it’s business. [For more information regarding the strategic default, see the July 2011 first tuesday article, Strategic default smarts.]
To cast your vote and read more about homeowner migration, see the November 2011 first tuesday article, Americans imprisoned in their homes.