The stigma of strategic default appears to be evaporating quickly, with 48 percent of American homeowners now saying they’d consider walking away from their mortgages if they found themselves with negative equity, according to a survey from Trulia.com and RealtyTrac, released yesterday. In May, just 41 percent said they’d consider such a move.
“Strategic defaults are moving further up in house prices, meaning, the more well-off people are realistically considering strategic default,” said Pete Flint, co-founder and CEO of Trulia, on a conference call following the release of the survey results. “I think the stigma is definitely gone.”
The survey, which reflects a growing pessimism amongst American consumers, was conducted last month with 1,329 U.S. homeowners and 652 renters.
The majority of those respondents now believe we’ll be waiting until at least 2013 before the housing market recovers, with more than one in five pegging that timeline at 2015 or later, Trulia and RealtyTrac said.
Meanwhile, half of them said they’ve lost faith in mortgage lenders, banks and the government as a result of the robo-signing debacle that’s spurred investigations into faulty foreclosure paperwork and the possibility of wrongful foreclosures. Thirty-five percent said they believe the scandal will further delay the recovery of the housing market.
And while the scandal won’t stop 49 percent of those surveyed from considering purchasing a foreclosed home, up from 45 percent in May, Americans are increasingly recognizing the risks of buying distressed homes, with 81 percent noting potential drawbacks to such purchases, up from 78 percent six months ago.
Rick Sharga, a senior vice president at RealtyTrac, said on the conference call that while the scandal is unlikely to have a long-term effect on foreclosure activity itself, it could affect foreclosure sales.
“Buyers across the country have been shaken a little bit in their willingness to buy properties until this issue gets resolved,” he said.
Flint added: “The scandal left a lingering bad taste in consumers’ mouths.”