To Stay or Walk Away

home defaultsMarkets finished down on Wednesday after starting off the week on two good feet. As we step closer and closer to Friday's unemployment numbers, you can sense the nerves in daily trading. Bull investors are hoping for strengthening numbers, however, there are many out there (including me) that feel that we have a ways to go. At any rate, even when we do start the hike back up, we sure have a lot of ground to cover to get back to 2 year's ago numbers.

Massive home devaluation is something that is plaguing millions of Americans across the country. The question, "when do I walk away?," sits heavily on many of their minds. No doubt family memories and emotional connections have been created at their homes, but those can become dulled if sitting on an asset that you are losing money in. The percentage of people who have no equity in their house is amazing and now, for many, walking away from their house, even with the funds to afford the mortgage, makes more sense.

Think about it, why stay paying into house that is worth much lower than your loan amount, when you can give back the house and rent a place bigger and better for half the price. Sure, a foreclosure on your credit isn't ideal, but there are ways to work around that and come out OK. Owners of recently purchased condos are handcuffed, with not only paying off a huge mortgage, but most likely paying ridiculous monthly HOA fees. With this becoming a very real decision for many home owners, it creates a rather dangerous scenario for the housing market.

First American estimated that it would cost approximately $745 billion to restore homeowner borrowers to a point where they are breaking even. Although such a scenario seems illogical for the government to consider, I would not rule it out yet and if such things do finally happen, watch out. All hell will break lose, beginning World War III for the economy. Whatever it may be, the housing problem is an important factor sill lingering, that must be worked out before we progress much further.

Big money has mostly been sidelined recently, as many of the big money managers feel that the market is too unstable to invest at this point. Cash holdings are at record highs and volume still remains low. Slowly, the idleness is priming the market for a big let down, one of which could get out of control if we're not careful. For me, I'm sticking with longing the dollar and shorting commodities. We'll see how it goes. Happy Trading.


  1. truelogic Says:

    Thread title and image reminds me of the story of Lot fleeing the city of Soddom with his wife.. LOLLL


    If I was way under water on my mortgage. I would consider walking away. But not before consulting with a lawyer first.