Walking Away vs. Fading Away

A number of my posts have been directed at people who are paying their landlords' mortgages for them.  In declaring independence from their landlords, many renters can experience new levels of lifestyle and freedom.  Now that it looks like the big drops in real estate prices are behind us, new home owners can feel confident that their lifestyle upgrade can endure for the long term.

The tragedy of home ownership is apparent in the half generation of home owners who bought before the beginning of the downturn.  There is a huge number of home owners who are underwater but not otherwise financially distressed.  They are the missing part of the housing industry's activity, and they could remain missing for the rest of their economic lives.  They are the ones who are ignored by government and even the media.  They don't want to walk away from their present, often outgrown home.  They want to move and they feel that there is only one honorable way to make it happen.

There are plenty of home owners who are following the Suzy the Doorman's advice, or the advice of other media hacks to walk away, but lots of others feel more responsibility to their commitments.  They are choosing to simultaneously become renters and landlords.  They are renting out their presently owned but overcrowded home, and they are finding an adequate place to rent for themselves.  They feel that this is their only honorable choice.

It's not hard to imagine a large scale migration to becoming renter-landlords and the possible fallout that could follow.  Given the risk of becoming an inexperienced landlord, a substantial number of them will find themselves with a mortgage payment and and tenants who are a lot less reliable than expected.  They could have unplanned additional expense and unplanned vacancy and unpaid rent. 

The landlord/tenants may eventually make up a new large group of eventual foreclosures.  They will not have walked away, they will have faded away.  Their physical connection to the home will have been broken, and they will find default and foreclosure a much less of a failure to honor a commitment than when they actually lived in the place they called home.