A majority – 59 percent of homeowners – would not consider “walking away” from their home to face certain foreclosure if they were “underwater,” owing more in mortgages than the value of their property, according to a new survey by two real estate research firms.
Only 1 percent of homeowners surveyed May 10-12 said walking away would be their first choice if they were unable to pay their mortgage, according to the online poll taken by Harris Interactive on behalf of Trulia.com and RealtyTrac.com.
If their mortgage were to go “underwater,” 41 percent said they would at least consider walking away, while 59 percent would not consider walking away – no matter how much their mortgage was underwater.
The survey results on walking away, also referred to as “strategic defaults,” were somewhat surprising given recent high-profile media reports – such as a segment on CBS’s 60 Minutes chronicling the epidemic of underwater mortgages and the rising number of those opting for strategic defaults.
Another notable finding in the Trulia-RealtyTrac survey was a diminishing interest in consumers’ willingness to purchase foreclosed properties, compared to one year ago.
Now, 45 percent of U.S. adults are at least somewhat likely to consider purchasing a foreclosed home in the future, compared to 55 percent surveyed by Harris Interactive in May of 2009.
Decreased consumer interest in foreclosed properties is a troubling sign, according to Trulia’s co-founder and CEO Pete Flint, who added that the government’s foreclosure prevention effort, Home Affordable Modification Program, HAMP, is failing to make a difference in the foreclosure crisis.
“For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes. It now seems clear that government programs will not reach the overwhelming majority of homeowners in trouble,” Flint said. “Combined with decreased consumer interest around purchasing a foreclosure it may take even longer than anticipated to see true health return to the real estate market.”
There is also the issue of realistic expectations in price discounts from bank-owned properties. Only 18 percent of those surveyed expect bank-owned homes to offer “a realistic price discount of less than 25 percent off the value of a similar home that was not in foreclosure.”
More than a third of those surveyed have unrealistic expectations, a statement by Trulia and RealtyTrac said; with 36 percent expecting to get a discount of 50 percent from bank-owned properties.
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