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Home loan payment obligation losing clout - Las Vegas mortgage borrowers change priorities

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Services for Real Estate Pros

Mortgage money to buy a houseA new twist is emerging in the ongoing real estate overload. There have been a few of them already as mortgage borrowers wrestle with all sorts of challenges that can put their home ownership in jeopardy. This probably won't be the last one, either. Times are rather unusual and fragile not only in the housing market, but also in the beat-up financial industry and the entire economy.

Historically mortgage payment has ranked as the number one priority for consumers, to be made before any other financial obligation. It assures that the roof over the head of one's family stays there, an important incentive. It also makes up for most the largest debt commitment they'll ever agree to and therefore is given extra weight, as it should be. Unblemished mortgage payment record can be a symbol of financial responsibility, and of pride, too. When FICO software figures out a score it thinks in those terms as well.

Mortgage payment has now lost its seemingly everlasting top spot, though, as was disclosed by Auriemma Consulting Group, or ACG, in its latest market research report called Cardbeat. Credit card bills have come from behind and cruised right past it, leaving it fuming in second place, and stunning some industry observers. Struggling consumers have obviously shifted their priorities in a major way.

Take the Southern Nevada - with communities like Henderson, Southern Highlands, North Las Vegas, Summerlin, Rhodes Ranch, Silverstone Ranch, Anthem and Mesquite - real estate market for instance and there are some clear answers to that change. Scores of homes are underwater - the home is worth less than the mortgage balance - quite a bit and with that comes the unfortunate feeling that making payments on a losing asset isn't that prudent any more. The more underwater the property is the more likely it is that the payment will lose weight. Also, it's possible the housing recovery here in Las Vegas will be slow and bumpy, offering little help for homeowners to erase all the negative equity any time soon.

The weakness of the national economy has left the consumer short on cash and left many of them jobless, too. Now they are thinking that credit cards will help them better with everyday living expenses. If something has to give, it's the mortgage payment before plastic. Besides, banks are canceling accounts for late payments, or for no reason at all, and often cut credit lines without blinking an eye. Those rascals. So card holders do their best not to fall behind.

The consumer is responding to what is happening around him in order to survive, that's all. In time the economy will grab and claw itself out of the murky depths and then the mortgage payment will again claim its spot on top of the list.

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_______________________________________________________________________________

Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst 

www.BluefoxToday.com - syndicated mortgage, housing and property management blog

eskokiuru@gmail.com
My cell: 702-499-1006

Comments (14)

Roy Paeth
Barrett Financial Group - Murfreesboro, TN
Just a regular guy helping real people!

Good info Esko.

Dec 12, 2009 03:00 PM
John Mulkey
TheHousingGuru.com - Waleska, GA
Housing Guru

Esko - I had not seen that info; it adds an interesting twist to the recession.

Dec 12, 2009 03:37 PM
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

Esko, this is very interesting and not surprising, frankly. With strategic defaults becoming more commonplace, coupled with the defaults already under way, something had to change or many people's credit would be sullied for a very long time.

Dec 12, 2009 03:59 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Esko I can understand why someone underwater on a mortgage might not see as much of a value in making those mortgage payments a top priority, but it is a big big mistake , and the ramification from late mortgage payments are much more damaging than any other late payment, except for maybe paying your taxes on time.

Dec 13, 2009 12:28 PM
Kate Kate
San Diego, CA

This real estate driven recession has more angles to it than City Center.

Dec 14, 2009 04:56 AM
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

I can't believe people choose plastic over shelter.  You default and plastic will find out and lower your limits, raise your rates or worse, cut you off!

Dec 14, 2009 11:09 AM
Esko Kiuru
Bethesda, MD

Roy,

Thanks for stopping by.

Dec 14, 2009 01:59 PM
Esko Kiuru
Bethesda, MD

John,

Short-term it'll add to the confusion.

Dec 14, 2009 02:00 PM
Esko Kiuru
Bethesda, MD

Sharon,

Really, in this particularly challenging housing environment it obviously makes sense to many.

Dec 14, 2009 02:01 PM
Esko Kiuru
Bethesda, MD

George,

Predictably they have weighed their options and decided go in this direction.

Dec 14, 2009 02:11 PM
Esko Kiuru
Bethesda, MD

Kate,

That's a good one, CityCenter sure is a project of angles. In my opinion too many of them.

Dec 14, 2009 02:13 PM
Esko Kiuru
Bethesda, MD

Renee,

Many probably hope to recover financially before being foreclosed on and this way get through this recession.

Dec 14, 2009 02:16 PM
Dianne Hicks
Realty ONE Group - Poway, CA

Esko - I think we have seen the same thing over here in the Inland Valley. I hope to see this pass and not see the ramifications of this in the future. I wonder what part of peoples view and how they operate will result when all said and done.

Dec 16, 2009 02:43 PM
Esko Kiuru
Bethesda, MD

Dianne,

Once the market returns to "normal" people probably will start treating mortgage payment again as #1.

Dec 16, 2009 03:37 PM