Strategic Defaults = Higher Consumer Spending

I have posted in the past about strategic defaults.

http://tradersutra.blogspot.com/2010/01/moral-question.html

http://tradersutra.blogspot.com/2010/02/hypocrisy-on-sterioids.html

Any wonder why American consumers are back to conspicuous consumption patterns? Could it be that they are not bogged down in underwater mortgage payments anymore. Why keep paying your mortgage when the property you are living in will never get back in the black?

Most banks are not even foreclosing on defaulters as they can't keep up with them. They just ask the homeowner to pay the property taxes and mow the lawn. So what we have in America is millions of homeowners who have stopped paying their mortgages, living free of charge and having a good time doing it. Of course the media spins this as something that is positive for the economy.

No one is talking about the divergence of foreclosures and delinquencies.

http://tradersutra.blogspot.com/2009/11/foreclosures-vs-delinquencies.html

http://tradersutra.blogspot.com/2010/03/principal-mortgage-writedowns-not.html

My dad's next door neighbor stopped paying his mortgage 5 months ago. Bank Of America is not foreclosing on him because they:

1-Don't want to pay the property taxes
2-Don't want to maintain the property
3-Don't want anymore homes on their books.

So this neighbor who has not paid his mortgage in 5 months just bought himself a brand new 50" inch Plasma from Best Buy. This is why retail sales is up in this country, because homeowners have all of this excess cash to spray around.

Did I also add that foreclosures surged to an absolute record?

http://www.realtytrac.com/contentmanagement/pressrelease.aspx?channelid=9&itemid=8927

http://www.realtytrac.com/foreclosure/repo/repossessed-homes-advantages.html

This announcement will tack on another 100 points to the DOW by midday.