As the housing crisis wreaked havoc across the nation, Washington state for many years seemed in a protected bubble. The state ranked almost dead last nationwide in rates of foreclosures and mortgage defaults. Well, as we report in this week's cover story, things have changed.
In other words, a lot of people should still be able to afford their mortgages. It's whether they want to pay them off that's the tricky part.
As property values have declined year after year, more and more homeowners have realized that they owe far more on their mortgage than their home is worth. Witness an engineer named "Jane," who bought a condo in Renton for $175,000 in 2008. It may now be worth as little as $60,000 or $70,000, such has been the hammering of south King County's condo market.
And so Jane and her husband, also an engineer, have decided to stop paying their mortgage and let the bank foreclose. (Jane is chronicling her adventure on a blog she started.) They made the decision to "strategically default," as it's called in the case of relatively affluent homeowners, with the full blessing of their attorney, whose advise can be summarized thusly: "Walk away, right now!"
It's a slow motion walk, though. Banks, which in many cases banks don't want the properties either, are taking literally years to foreclose. So homeowners can continue to stay put with, as one lawyer says, "zero housing costs."
Forget all the rules you knew about the housing game. As Tales From the Bust shows, this is a new, far more chaotic era.