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The Glut in the Mortgage Market: Self-Reinforced and Going Down

• DailyReckoning.com
 
And don’t forget the “strategic default” phenomenon. Professor Luigi Zingales at the University of Chicago estimates 35% of home mortgage defaults in December were by folks who could keep up their payments, but decided it just wasn’t worth their while on an underwater property. Nine months earlier, it was only 23%. And as more people do it, the stigma once attached to it falls away. “The risk that the number of people doing this might explode is significant,” says the professor. At this point, the housing glut appears to be self-reinforcing. The Census Bureau reports at least 6.6 million households had at least three generations under one roof in 2009. That was a 30% increase over 2000.

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