Maybe Squatters And Their Unpaid Mortgages Can Save The Economy?

By
Real Estate Appraiser with Donovan Group Realty

Can Our Mortgage Be Saved By Squatters Who Are Not Paying Their Mortgage Payments???

The last few years have been interesting to say the least, We've all seen home values deflate, unemployment increase, and investments devalued. And once that is done, it starts all over again in a vicious cycle.

We're all looking for answers:the end of civilization as we know it

How can we turn the economy around?

How can we establish sustained job growth?

Why is Jersey Shore still on TV?

Is there really a shadow inventory of REO homes and what can we do about it?

It goes on and on and on, lots of problems but very few possible answers. A recent article on Bloomberg authored by Robert Willis and John Gittelsohn may offer some hope, albeit from an unusual source.

The article describes how many (former) homeowners have been squatting in their homes, holding out against the pending or past foreclosure and using their unpaid mortgage payments to pay down loans, revolving c/c debt, or to buy cans of catfood for dinner until they find better employment. Beleive it or not, those people on your street who are setting fires in their living rooms to keep warm may be our way out of this mess.

squatters

This 'squatter's rent' is estimated to approach $50 billion in 2011. These monies are expected to contribute to a 2.8% increase in consumer spending this year. Consumer confidence is a key part of the vicious cycle I mentioned earlier. Investments falter, consumers lose confidence and restrict spending to increase savings, companies lower production and layoff employees, unemployment leads to home values declining, and MBS and other investments falter again.

We Americans are great at living in the moment and we definately do not like to sit around in a funk. I expect that we are already tiring of tightening the belt and even those of us with little expendable income will be looking for ways to live it up a bit. Squatters and former homeowners that are now renting can spend more than when they were keeping their mortgage current. Getting these dollars pumpled into the economy could lead to a decrease in unemployment or possibly even job growth.

If this newfound source of (somewhat) discretionary funds are really in the billions of dollars we may just find that these squatters who are occupying the 'shadow inventory' will contribute more to our recovery than we might like to admit. That said though, the huge increase in unemployment over the last year may also be why Jersey Shore is still on.

Posted by

Andrew McGrath - South Coast Metro Orange County

Comments (4)

Chuck Carstensen
RE/MAX Results - Elk River, MN
Minnesota/Wisconsin Real Estate Expert

Interesting way to look at it. They are still in trouble if they did not either pay down a lot or save a lot.

May 09, 2011 06:41 PM
Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

Jobs and consumer confidence is what drives the real estate market.

May 09, 2011 06:43 PM
Randy Ostrander
Lake and Lodge Realty LLC - Big Rapids, MI
Real Estate Broker, Serving Big Rapids and West Central MI

Consumer confidence is huge in our day to day world. Interesting spin on squatters. Seems to be a lot more commonplace thean ever before.

May 09, 2011 11:37 PM
Andrew McGrath
Donovan Group Realty - Santa Ana, CA

Hi Chuck,  youre absolutely  right. The bell will toll eventually and cash will be king in order for them to find a rental or some other place to go.

 

Hello Tim And Randy-I know squatters wont single handedly pull us out of the recession but yes I think their contribution could help us to collectively get past it. 

Thanks for your comments,

--Andrew

May 10, 2011 07:13 AM