Is the US Reaching a Strategic Default Tipping Point?

The New York Times writes tonight about strategic defaults on mortgages, and argues that enough mortgages are deeply enough under water to induce solvent borrowers to think about walking away:

New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying….

by the third quarter of 2009, an estimated 4.5 million homeowners had reached the critical threshold, with their home’s value dropping below 75 percent of the mortgage balance.

They are stretched, aggrieved and restless. With figures released last week showing that the real estate market was stalling again, their numbers are now projected to climb to a peak of 5.1 million by June — about 10 percent of all Americans with mortgages.

Although the Times doesn’t say where this “research” comes from, it is presumably survey research of some sort. The problem is that any survey or focus group research around money decisions is notoriously unreliable. And the story illustrates that data is limited:

Using credit bureau data, consultants at Oliver Wyman calculated how many borrowers went straight from being current on their mortgage to default, rather than making spotty payments. They also weeded out owners having trouble paying other bills. Their estimate was that about 17 percent of owners defaulting in 2008, or 588,000 people, chose that option as a strategic calculation…........http://www.nakedcapitalism.com/2010/02/is-the-us-reaching-a-strategic-default-tipping-point.html