People are just "walking away" from houses where the mortgage is more than what the house is worth. Jingle mail is increasing according to the New York Times.

The question is, how does that affect the owner's credit rating?  It seems like they don't care.  The motivation is to get out from under that big mortgage payment.

The bigger question is: How does this affect YOUR house and its value when your neighborhood starts seeing things like this happening?  No neighborhood is immune - not anymore. Those who took conservative approaches are paying for those who overstretched on housing.

JINGLE AND GO MINGLE

Some people have gotten stuck into this mess because they bought at the peak of the market and that condo, townhouse or mini-mansion house is worth 30-40% less than what they paid for it three years ago. In some cases, it's more like 50% less.

This is not just at the low-end of the market either. If your house was worth $1,600,000 when you bought it in 2007, and you now find out it is now only worth $750,000, would you “stay and pay” or “jingle and go mingle” somewhere else?

Another segment of the “jingle and go mingle” crowd bought their house a longer time ago, but used it as a way to buy that big SUV, boat and other big ticket items by taking out any of the accrued equity when they refinanced for a better rate.

Instead of accelerating the paying down of the mortgage when they refinanced, some people just stretched the mortgage out another ten years. A $150,000 mortgage balance on a $200,000 house that moved into a value of $300,000, was re-financed for a lower rate but for a balance of $240,000 (20% down equivalent). The owner took out all that equity ($90,000) for that new BMW or boat, tacked on another 30 years to pay and sometimes even had a cheaper or equal monthly payment. Now that same house is valued at $180,000 but the owner still owns a balance of $235,000 and the BMW is worth $19,000 now.

Other examples are even more out-of-whack than that one. What about this? A successful executive goes and builds a house for $675,000 five and a half years ago. The house appreciates to $835,000 and he is thinking, WOW, I made $160,000 in two years just on my house.” Then the downward spiral begins. His house is now worth $600,000. That is $75,000 less than what he paid for it originally. He considers himself lucky, because he is still making the payments and did not take out any equity.

The residential real estate market has become a game of hot potato and if you were the last one to buy your house two to three years ago, your house is probably worth substantially less than what you paid for it.

IT DOESN'T PAY TO PAY
Now everyone is paying for everyone else's mistakes.

Few took a conservative route where if they had 25 years left on a 30 year mortgage, they refinanced for a 15 year mortgage and cut ten years of payments out. They didn't take any equity out but they got a cheaper monthly payment PLUS it would be paid off in ten years less.

Sounded like a great plan, but the people that played it conservative have lost a lot of value on their house because the people next to them “wanted it all” and kept re-financing and spending whatever the built-up equity was. Or, some went for a jumbo loan and bought a $750,000 house instead of a $400,000 house that they could have afforded. Now they have a huge monthly payment they can no longer afford because that great job they had is now gone due to outsourcing or cheaper labor coming in to replace them and what they got into after pays significantly less.

Many who are “underwater” are thinking, “Hey, I'll just walk away and send the keys back to the bank.”

Some say we have turned the corner on the economy and we are recovering. The housing market has bottomed out and we are seeing positive numbers. Where? Fantasyland?

Carlinism:  Real estate is now like the stock market. You have to know when to buy in the peaks and valleys to make a profit.