Is Renting A Home Is the New American Dream?

HopeTracker|This is one of those amazing “only in America” stories. The focus is what’s called “strategic defaults” in home ownership.

On the face of the issue, walking away from a bloated mortgage is bad for credit. If one in five of those households defaults, the losses to banks and investors could exceed $400 billion. As a proportion of the economy, that’s roughly equivalent to the losses suffered in the savings-and-loan debacle of the late 1980s and early 1990s. via Wall Street Journal

That’s a big number of financial defaults for mortgage institutions, but the flip side is that without the mortgage payments and moving into very well-priced rentals instead, the added cash flow could amount to $5 billion a month, into the economy.

“It’s a stealth stimulus,” says Christopher Thornberg of Beacon Economics, a consulting firm specializing in real estate and the California economy. “The quicker these people shed their debts, the faster the economy is going to heal and move forward again.” via Wall Street Journal

At the bottom of this trend is the notion that perhaps home ownership wasn’t such a great idea, especially when the balloon mortgage payments came due on a house that was unaffordable, given the person’s income. Those houses are moving into foreclosure and many are now rented at significantly cheaper values. A