Like I posted earlier—there is no other time in our economic history except the GD. Yes people “lost” their homes due to job loss and investments becoming worthless, sorta like now, with 12.5% unemployment (reality over 20%) in California so many of these people making a strategic decision to walk away are just making the decision for themselves that the bank would make for them anyway. If you can’t make your payment you lose your property.
Granted this couple just doesn’t think they can have a family with the high mortgage payment verses what their income is today. Perhaps their income has dropped due to furlough or pay cut, but their is a huge mental hurdle to overcome when what you are purchasing has lost half its value instead of traditionally increasing in value a few percentage points a year.
Most of us posting here, including me, have purchased a home and enjoyed a nice increase in value over the years albeit with a drop in value in the last two but not under water. I will stay and continue to pay my mortgage because I feel that I haven’t overpaid, that in the long run my value will again begin to rise and I like my home. If I owed double what I paid, felt there would be no hope of recovering any of the purchase price and then had a drop in income, it might occur to me to make a strategic move. I lost equity not purchase price...a big difference.
There have been a number of times since the Great Depression when large numbers of Americans lost their houses. California from 1989-1994 with the end of the Cold War and the decline of the aerospace and defense industry. Texas in the ‘80s with the bust in the oil patch. Detroit and the rust belt with the demise of American steel and manufacturing.
During the ‘89-94 bust homes in California were down as much as 40%. I knew people who had to sell then, but it was due to job relocation and divorce. I never heard of anyone
considering a “strategic foreclosure” until this current episode. One considerable difference is that in the ‘89-94 era everyone had skin in the game, they couldn’t have bought without a downpayment. It is much easier to walk from a home that you financed 100% when you live in a non-recourse state like CA.