Posts Tagged ‘Residential Real Estate’

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Housing Has Bounced Back, but Capitol Hill Holds the Key to a Sustained Recovery

Friday, May 3rd, 2013

Houseforsale

The following article was reposted from Knowledge@Wharton

Published: April 30, 2013 in Knowledge@Wharton

The U.S. residential real estate industry is showing signs of a recovery. Demand for homes is growing stronger, driven by historically low interest rates and government subsidies. Job growth would, of course, accelerate that rebound. However, for a sustained recovery, housing supply must increase with both new construction and regulatory reforms that could bring to market homes that are “under water,” or those whose market prices are lower than their outstanding loans. Those were the main highlights from a panel discussion on real estate industry trends at the Wharton Economic Summit 2013, held in March in New York City.

A crucial element of the legislative reforms is to find ways to shield the federal government from home financing losses, the panelists said. The government ended up becoming the country’s biggest home financier after the 2008 housing collapse, when it bailed out secondary mortgage finance agencies Fannie Mae and Freddie Mac at an estimated taxpayer cost of up to $360 billion. Bipartisan political consensus holds the key to the reforms, panelists stressed.

The panel included Jeff Blau, CEO of Related Companies, a New York City-based real estate development firm; Jonathan D. Gray, global head of real estate at New York City-based financial advisory firm Blackstone; Jim Millstein, chairman and CEO of New York City-based financial advisory firm Millstein & Co.; and Richard A. Smith, chairman, CEO and president of Realogy Holdings Corp., a New Jersey-based real estate franchising and services company. Joseph Gyourko, Wharton professor of real estate, moderated the discussion.

Unexpected Recovery

“The metrics certainly indicate a much stronger interest in residential housing than it seemed in the previous six years,” said Smith. His firm Realogy operates in all 50 U.S. states and 102 countries and has a 26% market share of the U.S. housing market in sales volume. The recovery has gathered pace since the first quarter of 2012 and is “completely unexpected,” he added.

Consequently, home prices have strengthened and the overhang of unsold homes is bottoming out, but something “much more dramatic” is occurring, according to Smith. “We literally have markets where we have no supply, no inventory,” he said, citing New York City as an example of this phenomenon. He saw that across the country — a week’s supply of homes in San Francisco, no inventory to sell in Miami and an outpouring of open houses “in every market” where Realogy operates. “We feel very strongly that this is a strong recovery and it is sustainable.” In Phoenix, home prices are up 25% and they have risen in the “very high double-digit percentages” in Southern California, added Blackstone’s Gray.

Smith said the housing recovery is occurring despite impediments. He cited two issues relating to the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. One is a decision on what constitutes a “qualified residential mortgage,” or QRM, because that would set the criteria for the down payment for home loans that underwriters require. A related second issue is whether a decision about QRM could encourage developers to resume homebuilding.

Increased housing inventory is critical for a sustained recovery, Smith argued. A resolution to the QRM issue could release some of the 10.8 million homes that are under water, he explained. “If we do not have the increase in inventory, then we will still have a recovery, [but] that will be anemic.”

Since 2009, underwriters have been wary of risk and are lending only to “the highest possible standard” of borrower creditworthiness, Smith noted. He called for a speedy resolution of the matter and hoped the new debt-to-income criteria would be less onerous than people fear they might be. He clarified that he did not expect underwriting standards to become more lax. He only wanted to get back to the “pre-bubble” days, when underwriters required credit scores about 100 basis points lower than current expectations of about 750, he said. (Credit rating agencies award scores from 300 to 850.)

Follow this link to read the rest of the article:  http://knowledge.wharton.upenn.edu/article.cfm?articleid=3243

 

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Five Real Estate Tips from Warren Buffet

Friday, April 26th, 2013

home-for-sale

Spring is finally here and the housing market appears to be making a comeback.  With prices that are still historically low and mortgage rates in the 3% to 4% range, owning a home has never been more affordable.  That being said, there are still some basic principles that potential home buyers should keep in mind.  In the articel below Tara-Nicholle Nelson list 5 real estate buying tips offered by Warren Buffett.

Article by Tara-Nicholle Nelson of Daily Finance

Billionaire. Oracle of Omaha. The most successful investor in the world. All of these are used frequently — and accurately — to describe Warren Buffett, Chairman of Berkshire Hathaway, a holding company with upward of $130 million. Though his stock in trade is, well, stock and trade, over the years, Buffett has actually spun quite a bit of wisdom on real estate, and much of the advice he has given to investors in traded assets would also stand the average American homeowner in good stead.

Looking for some wisdom on the best approach to owning a home? Here’s a sampling of real estate tips from Buffett, right, the third richest human being on the planet.

1. The Basic Premise of Home Ownership — That Homes Increase In Value Over Time — Is Sound

Last spring, the Congressional Financial Crisis Inquiry Commission called Buffett in for an interview. He was asked to explain some of his bubble-era investment decisions, as well as to give his take on what in the heck had happened to the economy. In the process, Buffett expressed his belief that the housing bubble was inflated by an irrational, widespread belief that home prices would only ever go up — an extreme corruption of a generally valid premise. “It’s a totally sound premise that houses will become worth more over time because the dollar becomes worth less,” Buffett declared.

The sound premise, Buffett explained, got distorted and eventually caused the housing crisis when Americans started buying multiple homes to cash in on what they assumed was guaranteed appreciation, taking out “liar’s loans,” buying homes with no down payment and with unaffordable monthly payments — and lenders let them — all because of the assumption that prices could never go down.

Clearly, this assumption was wrong. As Buffett said in an earlier shareholder’s letter: “A pin lies in wait for every bubble.”

2. Buy Low (And Now Would Be a Good Time for That)

Buffett writes a letter to Berkshire Hathaway’s shareholders every year that is chock-full of his review of the company’s fortunes (literally) over the preceding year, his analysis of the stock market and the economy in general, and his smart, plain English tips on life and money and on life.

In last month’s annual shareholder letter, Buffett addressed the industry-leading 2010 performance of one of his company’s holdings, which sells and finances manufactured homes. During that discussion, the money maven declared that now would be a sensible time to buy a home, in light of record-high affordability: “Home ownership makes sense for most Americans, particularly at today’s lower prices and bargain interest rates.”

And Buffett didn’t stop there. He pointed out his own tenure as a homeowner as an example. “All things considered, the third-best investment I ever made was the purchase of my home, though I would have made far more money had I instead rented and used the purchase money to buy stocks,” he wrote. Then, to clarify for the readers who’d want to know what numbers one and two were, Buffett elaborated: “The two best investments were wedding rings.”

3. But Don’t Wait Too Long To Take Advantage of Low Prices

Buffett wrote a 2008 Op-Ed in the New York Times, explaining that buying while prices are low is stressful, because economic markets are volatile and impossible to predict in the short term, even for him. So, when conditions make an investment — in stocks or in a home — particularly advantageous, Buffett says not to hesitate too long. Painting a vivid verbal image to illustrate the likelihood that market prices “will move higher, perhaps substantially so, well before either sentiment or the economy turns up,” Buffett warned: “if you wait for the robins, Spring will be over.”

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The “A” Lot Shortage and the Buying Frenzy Intensify: What’s a Builder to Do?

Sunday, April 21st, 2013

The historically low inventories of homes for sale is creating new opportunities for home builders. The number of housing starts has continued to increase when compared to the last several years. While the number of housing starts is still considerably below the levels seen in the early to mid 2000′s, the increase in activity is creating an acute shortage of build-able lots in good locations. This shortage is putting an upward pressure on the price of quality lots. Prices in some areas are nearing pre-crash levels. The article below by Brad Hunter illustrates what is happening in other markets around the country. Home builders in the Twin Cities are saying they are seeing the same trend in our market as well.

house construction

Posted in National Housing Market   Written by Brad Hunter

As the lot feeding frenzy builds, more and more builders are scratching their heads at the prices they are being asked to pay for homesites.  Builders have a strong motivation to increase their community counts, but they are having to pay near-peak prices for lots in order to do so.  Decisions made by builders in the next six to twelve months will be absolutely critical to their ongoing financial health.

Last fall, we conducted a special nationwide study of all the public homebuilders’ lot positions, and we found that most of the public homebuilders had seen an erosion of their Vacant Developed Lot count (VDL).  In that special study, we looked at the VDL’s that were associated with the builders, whether owned or optioned, for all of their communities within our footprint.  We found that most builders saw a reduction in their lot inventory, but many of them started going longer on lots at that time.

We discovered the following changes in lot count, year over year:

Meritage’s lot inventory was down 22.4% from mid-2011 through mid 2012.

Lennar was down 18.2%

Standard Pacific, known as a land-LONG builder, was only down 4.3%.

Toll was up.

MDC was down 21.7%.

Beazer was down 20.2%

As a group, the publics were down in lot supply by 15.9% year over year.

Since this time, many builders who found a need to be LONGer on land have made significant progress in shoring up their lot positions.

The problem that has arisen is that they have had to buy at much higher prices than prevailed 12 months earlier.  In many markets, lot prices have jumped by 50% in a year.

The rebound in Phoenix home price and in lot prices is well known.  What is less well known is that NON-bubble markets like Houston and Dallas have also seen this kind of rebound.  In Texas, Fort Bend, Harris and Collin Counties have experienced a noticeable drop in available  supply of good lots relative to demand.  Here is a great case study:  In The Woodlands, in Houston, there has been a DOUBLING of lot prices in the past 12 months.  Lots in that community now run as high as $2,700 per front foot.

Even Atlanta, yes, badly over-developed and much-maligned ATLANTA, has seen a 30% increase in lot prices in the most desired neighborhoods.  That reflects the fact that the only lot transactions that are happening are in the “A” locations like South Forsyth.  We forecast that in another 18 months, there will be lot SHORTAGES in that submarket.  Many builders are jumping into Atlanta now, precisely because there are still some affordable lots there.

Lot prices in Naples/Ft. Myers have gone up 50%, and raw land values have doubled (and in some submarkets TRIPLED).  Of course, these percentage changes are based on low starting numbers, but the point remains that it costs a lot more to stay in the business in 2013 than it did in 2012.

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St. Thomas real estate analysis: Twin Cities data for February offers more signs of a recovering market

Tuesday, March 26th, 2013

 The unusually low inventory of homes for sale has had a two-fold effect: crews are building more new homes and there’s an upward pressure on asking prices.

February-2013-Chart.jpg

 Minneapolis, Minn.  –   An analysis of Twin Cities real estate data for February shows that the housing market is continuing to recover along with the economy; home prices, new-home construction, and the percentage of traditional sales (not foreclosures) are all on the upswing. 

Meanwhile, a historically low number of homes on the market is continuing to put upward pressure on sale prices.

 In the Twin Cities, the median sale price of a traditional home (not a foreclosure or short sale) was $205,500 in February. That’s up 2.75 percent over the January median price of $199,000 and up 14.2 percent over the February 2012 median price of $180,000.

 That’s according to the Residential Real Estate Price Report Index, a monthly analysis of the 13-county metro area prepared by the Shenehon Center for Real Estate at St. Thomas’ Opus College of Business.

 Each month the center tracks nine housing-market data elements, including the median price for three types of sales: nondistressed (traditional-type sales), foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance).

 Herb Tousley, director of real estate programs at the university, expects home prices to increase in the coming months because of normal seasonal fluctuations and because of the tight inventory of homes on the market. “As median sale prices increase and homeowners’ equity positions improve, more homes should be listed for sale.” He added that the number of distressed properties available for sale should continue to decrease as the economy continues to improve and the number of foreclosures continues to moderate.

 The Twin Cities saw 921 foreclosure sales in February 2013, down from 1,191 in February in 2012. Tousley pointed to the type of closed sales as an early indicator that the Twin Cities is on the path to a more healthy housing market. The total volume of closed sales in February 2013 was down slightly from February 2012. However, the percentage of traditional (nondistressed) sales in February last year was 43.5 percent of the total, and this February it is 55.3 percent of the total. “The past few months of having traditional sales total at least 50 percent of all sales is an encouraging sign that distressed properties are becoming less numerous and as we move into the spring and summer of this year we should see a stronger housing  market that is dominated by traditional sales,” he said.

 And while the low inventory of homes on the market is putting upward pressure on home prices, it also is creating opportunities for new-home builders. “Data show that the construction and sale of new homes is beginning to play a larger role in the Minneapolis-St. Paul housing market,” Tousley said. In January 2013 there were 360 building permits issued for single-family home construction. This is an 80 percent increase compared to 200 permits issued in January 2012. The closed-sales data in February shows a similar trend. In February 2013, 7 percent of the closed sales were new construction, up from 5.4 percent in February 2012.

 More details about the market, including an analysis of distressed-property sales during the winter months, can be found on the Shenehon Center’s website: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

 Research for the monthly reports is conducted by Tousley and Dr. Thomas Hamilton, associate professor of real estate at the university. The index is available free via email from Tousley at hwtousley1@stthomas.edu.

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Will Wall Street Buy Into Single-Family Rental Craze?

Monday, March 11th, 2013

So Far, Institutional Ownership of Single-Family Rentals Appears to Have Legs, Analysts Say

Here is an interesting article from the CoStar Group about the changing face of the single family home rental market.  A trend is developing among institutional investors to purchase large numbers of single family homes for rental.  Our of the first to do this is a local company, Pine River Capital Management LP through its Silver Bay Realty Trust

By Randyl Drummer at CoStar Group

Private-equity funds, pension funds and other institutional investors have been playing in the single-family rental investment market since the middle of last year, but the space is likely to get quite a bit more crowded in coming months as public REITs join the party.

Along with dozens of other private firms and pension funds, two of the biggest private equity investors in the world, Blackstone Group LP and Colony Capital LLC, formed private REITs and stepped up their acquisitions of vacant homes to be converted to rentals last year, initially targeting the large pool of distressed housing in Arizona, Georgia, Nevada, Texas and Florida, where prices have fallen furthest and been slower to appreciate.

Among the other major players was pension investor Alaska Permanent Fund Corp., which provided $600 million in investment capital to Malibu, CA-based American Homes 4 Rent to purchase and manage foreclosed homes.

As of last week, American Homes 4 Rent — led by Wayne Hughes, who founded Public Storage (NYSE: PSA), one of the largest self-storage REITs in the U.S. — announced it will go public, using net proceeds from its planned IPO to acquire and renovate single-family homes.

Yet while the planned IPO is the most-anticipated offering in the single-family rental space, it’s not the first. That distinction goes to Minnesota-based Silver Bay Realty Trust (NYSE: SBY), a spinoff of mortgage REIT Two Harbors backed by Pine River Capital Management LP that went public in December, raising $245 million. The firm has acquired 2,500 homes with plans to acquire another 3,000.

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St. Thomas real estate analysis: 2012 will be seen as the year the housing market finally hit bottom and began its recovery

Friday, January 11th, 2013

mortgages

 December’s median prices continue to show gains over last year; momentum is expected to continue into 2013.

With data from December now in, history will record that 2012 was the year the Twin Cities housing market finally bottomed out and began to recover.

 The market’s low point came in February 2012. Since then, the median sale prices recorded in 2012 have exceeded the 2011 levels every month, according to the Residential Real Estate Price Report Index, a monthly analysis of the 13-county metro area prepared by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business.

 Each month the center tracks nine housing-market data elements, including the median price for three types of sales: nondistressed or traditional-type sales, foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance).

 The overall median sale price for all categories of homes in the Twin Cities peaked at $238,000 more than six years ago, in June 2006. That overall median price hit its low point in February 2012 at $138,250.

 Herb Tousley, director of real estate programs at the university, said housing data from December “continues to exhibit many of the positive market trends that have been observed for much of 2012.”

 The median sale price in December 2012 for all categories of homes was $168,404, a gain of 16.2 percent over December 2011 when it was $145,000.

 The median price of a nondistressed home in the Twin Cities peaked in June 2006 at $239,900 and reached its low point in February 2012 at $180,000. Since last February the median price for these traditional home sales increased steadily until peaking in August 2012 at $219,700.  The median price then began its seasonal, fourth-quarter decline, ending at $208,000 in December 2012. That was a 9.2 percent increase over December 2011.

 More details about the market can be found on the Shenehon Center’s website: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

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Why the Housing Market Is Poised to Enter a ‘Virtuous Cycle’

Thursday, September 27th, 2012

As the good news for the housing market continues to accumulate more people are asking the question “Is this recovery for real?” As was noted in the most recent University of St Thomas Residential Real Estate Index Housing Report for August, median home prices in the Minneapolis / St. Paul market are not only continuing to increase, but they also continue to remain higher than last year’s median prices. The percentage of distressed sales has moderated and the average time it take to sell a house is decreasing. 

(Link to the report http://www.stthomas.edu/business/centers/shenehon/research/default.html/)

These trends are being reflected in most of the major markets around the country. What makes this recovery period different from some of the false starts we have had in the past? What are the factors that are driving these trends?  The article below was recently published in Knowledge@Wharton. It provides an interesting analysis of the state of the housing market today.

Published: September 26, 2012 in Knowledge@Wharton

By the less-demanding standards of the past few years, the latest housing figures, like many from recent months, look pretty good.

On September 25, the Standard & Poor’s Case-Shiller Home Price Index showed a 1.2% price gain in July compared to a year earlier. Prices have risen for three consecutive months. The National Association of Realtors (NAR) reported on September 26 that sales of existing homes had risen by 9.3% in August, compared to a year earlier, and that the median price of existing homes sold was up 9.5% over the past year. (NAR and Case-Shiller use different methodologies.)

For the 12 months ended in July, sales of newly constructed homes were up about 25%, though the total was still only about half of the 700,000 units considered healthy. Experts are especially impressed that prices of the least-expensive third of homes lead the gains, going up a full 1% between June and July. Those homes had received the worst drubbing in the recent housing market collapse.

Is this the start of the long-awaited and elusive housing recovery — one that would bring a stronger economy overall? Or is the market just taunting us as it bumps along the bottom, perhaps only to plunge again?

“It’s for real. This is absolutely for real,” says Susan Wachter, professor of real estate at Wharton. The market, she says, is poised to enter a “virtuous cycle” where positive trends will spur more positive trends. “This market recovery will continue,” she says, predicting that rising prices will prod potential buyers to buy before prices go up more. That demand will nudge prices up, drawing in even more buyers.

“I have been optimistic about this market for six months or a year,” she adds, noting that the latest data supports an analysis of the market she offered in a recent paper co-authored with Mark Zandi, chief economist and co-founder of Moody’s Economy.com, and Moody’s analysts Celia Chen and Cris DeRitis. The paper, “Assessing the Housing Threat and the Appropriate Response,” was prepared for a recent Pew Charitable Trusts conference titled, “Strategies for Revitalizing the Housing Sector.”

A Sense That Things Are Getting Better

Though the average home is still worth 30% less than at the peak of the bubble in 2006, from January through July, prices rose 5.9%, the strongest performance in seven years.

Read the rest of the article:  http://knowledge.wharton.upenn.edu/article.cfm?articleid=3085

 

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Silver Bay Realty Files IPO To Be First Single-Family Rental REIT

Friday, September 21st, 2012
A recent report from CoStar written by Mark Heschmeyer indicates that a local company may be the first publicly REIT that invests in single family homes.
 
September 19, 2012 

Silver Bay Realty Trust Corp. is aiming to be the first firm out of the IPO gate to become a publicly traded REIT focused on the acquisition, renovation, leasing and management of single-family rental properties for rental income and long-term capital appreciation.

The proposed REIT won’t be alone in chasing deals in the distressed housing market as several private investors have also been raising money for such ventures.

The Minnetonka, MN-based Silver Bay filed a proposed initial public offering of its common stock looking to raise up to $287.5 million.

Two Harbors Investment Corp., a New York-based publicly traded mortgage REIT, will contribute its portfolio of some 700 single-family rental properties valued at approximately $75 million to help form the venture.

The contribution is intended to be part of a larger transaction in which Silver Bay expects to acquire two other large portfolios containing about 800 homes from Provident Real Estate Advisors LLC while concurrently offering its common stock.

Silver Bay will be externally managed by PRCM Real Estate Advisers LLC, a joint venture between a Pine River Capital Management affiliate and Provident Real Estate, a private capital management firm. An affiliate of Pine River also serves as the external manager of Two Harbors Investment.

In its IPO filing, Silver Bay called the large-scale, single-family residential rental industry a relatively new market in the U.S.

“Until recently, this industry has been fragmented in both its ownership and operations, consisting primarily of private and individual investors in local markets and managed by local property managers,” Silver Bay stated. As a result, the firm believes a compelling opportunity exists to accumulate a large portfolio of properties and lease them to tenants for attractive yields.

Read the rest of the article:  http://www.costar.com/News/Article/Silver-Bay-Realty-Files-IPO-To-Be-First-Single-Family-Rental-REIT/141622?ref=100&iid=298&cid=FC4C5ECBFF14BCA42CFC3FCF0353A739

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Will Micro Apartments Go Macro?

Tuesday, August 14th, 2012

Several urban job centers have committed to building tiny, affordable housing units.

There is a new multi-family housing trend beginning to appear in some of the higher priced housing markets around the country.  Ultra small “mirco-apartments” are one answer that can make apartments affordable to young renters in these high priced areas.  Will this trend find it’s way to the Minneapolis / St. Paul Market?  This article by John Caulfield recently appeared in BUILDER

From: BUILDER 2012

By John Caulfield 

An 11,775-square-foot building with 23 micro apartments is being wedged onto a 3,750-square-foot lot between two other buildings in San Francisco’s SoMa district.

Construction has begun on an infill project at 38 Harriet Street in San Francisco that its developer, builder, and module supplier believe could determine whether micro apartments remain a highly publicized curiosity or are seen as legitimate housing alternatives for young urban professionals seeking cheaper, greener, and walkable living spaces.

“There are a lot of eyes on this project, a lot of interest,” says Naomi Porat, president and co-founder of Zeta Communities, whose factory in Sacramento, Calif., is close to completing the 12- by 65-foot modules that will be used to construct an 11,775-square-foot four-story wood-framed building squeezed onto a 3,750-square-foot lot in this city’s South of Market Street (SoMa) district. That building will contain 23 micro apartments measuring around 300 square feet each, with nine-foot ceilings, kitchens and baths, washers and dryers, and multipurpose built-ins for storage and workspaces that can convert to sleeping areas.

These apartments reflect a “Smart Space” concept that the project’s developer, Panoramic Interests, created with a team of architects and designers to address the needs of millenials poring into urban job centers where affordable housing is perennially in short supply.

“In San Francisco, 8,000 new tech workers have been hired this year alone,” says Patrick Kennedy, the owner of Panoramic Interests, to illustrate the potential demand for micro apartments. His firm test-drove its Smart Space design with a 160-square-foot prototype it built in a warehouse in Berkeley, Calif., and housed an MIT grad student for three weeks who provided feedback about what he thought did and didn’t work.

Kennedy told the San Francisco Chronicle that prospective residents of micro apartments are looking for a “launching space as they get established.” In an interview with Builder, he described micro apartments as “a return to more collaborative communal living.” He observed that millenials view apartments in the context of a lifestyle that is more socially and technologically defined. “They’ll trade 100 square feet of space for 100 more megabytes of Internet,” he quips.

And with monthly rents expected to start at $1,500 (with five of the 23 apartments being offered at a below-market rate of $910 per month), these micro apartments should be available for significantly less than the $2,000-plus per month an under-500-square-foot studio apartment fetches, on average, in San Francisco.

Read the entire article: http://www.builderonline.com/construction-trends/will-micro-apartments-go-macro-.aspx

John Caulfield is senior editor for Builder magazine.

 

The 300-square-foot apartments will feature 9-foot ceilings, kitchens and baths, storage, and flexible built-ins.

Panoramic Interests

These renderings show how renters can manipulate the space inside the apartments to turn a sleeping area into a work or eating space.

  • Panoramic InterestsLarge windows and high ceilings give these tiny spaces a more capacious feeling.

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Posted in Affordable Housing, Commercial Real Estate, Development, Green Building, Industry News, Multifamily, Real Estate Trends, Residential Real Estate, Think Outside The Box, Urban Planning | No Comments »

Economists in Survey Oppose Strategic Default, Principal Forgiveness

Wednesday, August 1st, 2012

The article below is by Esther Cho at DSNews.com.  It points out that most economists surveyed would continue to make their mortgage payments even if their property was underwater.  Strategic default is the practice of walking away from a property that is underwater even though the borrower has the financial ability to continue making the payments. I find it interesting that in the commercial real estate, in many cases companies will use a strategic default as a business tactic with little stigma attached. For individuals, however, the situation is much different, the stigma associated from voluntarily walking away from a debt obligation is a major detriment.

Nearly three-quarters of economists surveyed said they would continue making their mortgage payments even if they were deeply underwater, Zillow reported Thursday.

Strategic default, which is when homeowners decide to stop paying their mortgage even though they can afford it, is oftentimes motivated by negative equity.

In Zillow’s Home Price Expectation survey for June, 71 percent of economists said they would not choose strategic default, even if they owed at least 40 percent more on their mortgage compared to the home’s current value.

The survey, which was conducted by Pulsenomics, included 114 responses from economists, real estate experts, and investment and market strategists.

The industry experts were also questioned on their position concerning a government-sponsored program to forgive principal for underwater homeowners.

Coming close to the percentage of those who said they would not strategically default, 72 percent said they opposed a principal reduction program, while 28 percent were in favor of one.

Read the entire article:  http://www.dsnews.com/articles/zillow-three-fourths-of-economists-surveyed-oppose-strategic-default-principal-reduction-2012-07-26

 

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