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new-10yr-halfpage.pdf 1 8/15/12 11:06 AM ยป VISIT US ONLINE @ DSNEWS.COM C M Y CM MY CY CMY K ECONOMISTS AND HOMEOWNERS ALIGN IN OPPOSING STRATEGIC DEFAULT quarters of economists surveyed said they would continue making their mortgage pay- ments even if they were deeply underwater and a nearly equal amount said they are against principal reduction programs, Zillow reported. Strategic default, Nearly three- economists, real estate experts, and investment and market strategists. These industry experts were also questioned on their position concerning a government-sponsored pro- gram to forgive principal for underwater homeowners. Coming close to the which is when home- owners decide to stop paying their mortgage even though they can afford it, is oftentimes motivated by negative equity. In Zillow's Home Price Expectation survey for June, 71 percent of economists said they would not choose strategic default, even if they owed at least 40 percent more on their mortgage compared to the home's current value. The survey, which was conducted by Pulsenomics, included 114 responses from homeowners, not just economists, 59 percent of respondents said they would not strategi- cally default under the same conditions. Thirty-seven percent of homeowners who said they would not strategically default cited moral reasons, while 35 percent said it didn't make sense since they intended to live in their current home for a long time. "We were initially surprised that so few In a different Zillow survey involving tion program, while 28 percent were in favor of one. "These survey results suggest that eco- percentage of those who said they would not strategically default, 72 percent said they opposed a principal reduc- nomic and financial considerations are not the dominant drivers of behavior for even deeply underwater borrowers," said the founder of Pulsenomics, Terry Loebs. "This under- scores the challenges in valuing underwater mortgages and in determining the costs and benefits of principal forgiveness initiatives." economists would be willing to strategically default, since when you do the math, it can often be the best economic choice, if you leave aside moral and ethical considerations," said Stan Humphries, Zillow's chief econo- mist. "Of course, strategic default is not just a mathematical decision. The most common reason for avoiding strategic default cited by homeowners was that it is a moral issue. That likely comes into play with economists and analysts, as well." According to Zillow's first-quarter negative equity report, nearly 75 percent of underwater homeowners owe at least 40 percent more than their current home's value. The report also stated that 15.7 million U.S. homeowners, or 31.4 percent, are underwater. 33