In 2005 and 2006, the Tampa Bay real estate market was booming. Mortgages were easy to obtain, home prices were rising, and everyone wanted in on the "American Dream". Owning a home has been the goal of nearly everyone I have known or met, and keeping that home has always been at the top of the list when hard times hit.
Then came the foreclosure crisis and a crashing economy. It has changed what
was traditionally a strong tie homeowners had with their homes. What used to be
an unthinkable option has become more and more common as homeowners watch
banks, auto companies, and other big business get bailed out with tax dollars,
while very little is done to help them with the crashing value of their home.
Property values in the Tampa Bay area have fallen more than most places across the
U.S., and the result has been a larger volume of what is termed a “strategic
default” in our area.
And it appears that the likelihood of those types of defaults might
be on the rise this year.
According to a new survey by FICO, bank risk auditors seem believe
that more people may be opting for a “strategic default” over the next year, which
in turn could slow the recovery of the housing market.
Of the auditors asked, 46% said they expect the number of
strategic defaults in 2012 will surpass 2011 levels given that over 25% of U.S.
homeowners are “under water” or owe more on their mortgages than their homes
are worth. In the Tampa Bay area, the percentage of “underwater”
homeowners is much higher. One bank representative said that “After five years
of a brutal housing market, many people now view their homes more objectively
and with less sentimentality."
Participants in the survey said they were concerned about
changes in customers’ attitudes towards payment and debt obligations and when
asked whether the current generation of homeowners sees a mortgage as their
“most important credit obligation,” 49% of the bankers said no.
The results of the survey shows a strong belief that homeowners
who find themselves upside down on mortgages in the future will likely consider
strategic default as an acceptable exit strategy.