From the front page ($) of today’s Wall Street Journal:
LOS BANOS, Calif. — In this California city, one of the hardest hit in the national housing crash, there’s good news: Homes are starting to sell again.
Investors and first-time home buyers are snapping up foreclosed houses here, with the number of local sales up almost fivefold from this time last year. While the volume of existing-home sales across the U.S. fell 10.7% in August from the previous year, according to the National Association of Realtors, there are signs that the most damaged of markets are starting to heal themselves. Across hard-hit California, sales volumes rose 65% in September compared with a year ago, said MDA DataQuick, a San Diego-based real-estate information service.
Now the part of the article that ticks me off (emphasis mine):
The bad news is that the latest round of sales is unleashing another round of pain in cities such as Los Banos, a commuter community in California’s Central Valley. With home prices already down 66% from their peak here, most homeowners owe more on their mortgages than their houses are worth. Successive deals bring new low prices, leaving remaining owners with little incentive to keep current on outsized mortgages.
Some stop paying, pocketing the money while they wait for their lenders to kick them out. A few lose their homes only to stay on as renters, paying hundreds of dollars less a month. Every fifth house in this onetime real-estate boomtown is in some state of the foreclosure process.
What about the incentive of keeping a good name and taking care of your responsibilities even when the times get tough? If the homeowner can afford the payment on the house and it hasn’t changed, then what difference does it make if the homeowner is upside down on the mortgage? The only time the amount of the mortgage should come into play is if the homeowner has to move.
I say bring back debtor’s prisonthen maybe people will have an INCENTIVE to keep current.