“The modest, the sober, the prudent get penalized while the “free lunch” goes to the imprudent & the stupid.”
Yes and no. You’ll still have a house over your head in 2-5 years for the same amount it’s costing you now. The same can’t be said about your imprudent neighbor. Yeah, he might not have to pay rent now, but he will have to pay dearly when the foreclosure goes through. And rents will be going up, up, up when it becomes virtually impossible for people to buy a home without impeccable credit and a huge downpayment because you can’t get a mortgage.
The tortoise wins the race.
Keep in mind that the lenders were imprudent and stupid as well. The imprudent and the stupid deserve each other.
The stupid (banks) got bailed out and thier profits go up. Only smaller banks are allowed to fail.
It is a mistake to think that foreclosure or short sale or simply walking away from a house ruins your credit. It may or may not. I hear plenty of stories of people religiously paying their credit card bills but not making mortgage payments. Then keeping the bank from evicting them for months or years. Their credit may or may not be impacted or ruined. They make credit card payments because (as wacky as it seems) messing up on your credit cards hurts your credit score a lot more than walking away from a house or a foreclosure. Every case is different of course.
They can still buy a house and get a mortgage in many cases
I heard one story where a family bought a huge house they could not afford. The house went underwater. They walked away from it and in the same time frame bought and moved into another house that was far more affordable at today's prices. I don't have details on that one