by Calculated Risk on 12/09/2009 09:09:00 PM
Wednesday, December 09, 2009
Mark Whitehouse writes about the advantages of renting in the WSJ: American Dream 2: Default, Then Rent (ht Pat)
Whitehouse describes one former homeowner with a monthly income of $8,300. He was paying $4,800 a month on his home and he was basically working to pay his mortgage. He was really a "debt owner" since the home was worth far less than the amount owed. He now rents a similar home for $2,200 a month and is enjoying life:
[H]e now has the wherewithal to do things he couldn't when he was stretching to pay the mortgage. He recently went to concerts by Rob Thomas and Mat Kearney. He also kept his black BMW 6 Series coupe, which has payments of about $700 a month.This is one of the tragedies of the housing bubble - it encouraged people to become homeowners before they were really ready and also encouraged them to buy too much home (58% DTI for the mortgage is definitely "house poor"). Many of these people will not buy again for years, if ever.
"I don't know if I'll buy another house again, because it's such a huge headache," he says.
The article also mentions the "stealth stimulus" from all the delinquencies:
For the 4.8 million U.S. households that ... haven't paid their mortgages in at least three months, the added cash flow could amount to about $5 billion a month ... "It's a stealth stimulus," says Christopher Thornberg of Beacon Economics ...