A debt crisis looms as renters turn to credit cards to stay afloat

[Anonymous]

@M_Smart007 

"No equity to tap into."

The number of mortgages severely delinquent is over double this time last year and rising fast.

It's way easier to walk away from an apartment and have the landlord give up coming after you than sink your money into a mortgage for years and then lose the house anyway. I've broken plenty of leases and then negotiated the landlords down to something small after the fact. A bank you still owe tens or hundreds of thousands to isn't so easy to get rid of. Plus, "tapping the equity" just puts you that much further from real home ownership, because the house is securing it. 

A bank is really just a nastier landlord that doesn't fix anything to most people. 

[Anonymous]

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[Revelate]

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@Anonymous wrote:

@M_Smart007 

"No equity to tap into."

The number of mortgages severely delinquent is over double this time last year and rising fast.

It's way easier to walk away from an apartment and have the landlord give up coming after you than sink your money into a mortgage for years and then lose the house anyway. I've broken plenty of leases and then negotiated the landlords down to something small after the fact. A bank you still owe tens or hundreds of thousands to isn't so easy to get rid of. Plus, "tapping the equity" just puts you that much further from real home ownership, because the house is securing it. 

A bank is really just a nastier landlord that doesn't fix anything to most people. 

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If you've been paying down that mortgage for years, it's honestly not that likely you're underwater, especially right now, unless you happened to buy at a bubble peak and then there was a collapse soon after and even the Great Recession has been recovered from in a lot of markets... even without the loopy stupid mortgages that drove the mortgage crisis, people still want to live there.  Or if I suppose you did something flat stupid financially, but more on that later.

Even if I sell my LA condo for a straight loss even from what I paid for it (say 320K sale price) is my remaining mortgage is only around 185K now and that means even at that ~300K to me scenario after realtor fees and the like, I'm still walking away with over 100K.  Really I would expect to sell around 400K to me based on easy comps and that goes a long ass way to paying off everything else I have in life currently marked as a debt, or a very long runway if I wind up unemployed and have to retool through a real (this time) college run or similar.

Walking away in the rental situation: $0.

Renting is just not good financial math unless you are in a declining market and those generally are pretty short duration.  I think we'll get through this COVID thing, it hasn't turned out well for everyone but home equity is a powerful financial defense resource even if you have to flake on it... now if you spent it frivolously like all those cars I saw on the 405 in LA namely using the home equity like a piggy bank instead of a long-term savings vehicle, well...

[Anonymous]

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@M_Smart007 wrote:

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@SouthJamaica wrote:

A debt crisis looms as renters turn to credit cards to stay afloat

Experts worry people may be destroying their credit to make ends meet during the pandemic.

https://crosscut.com/focus/2020/09/debt-crisis-looms-renters-turn-credit-cards-stay-afloat

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I wondered what would happen, when people run out of unemployment and stimulus monies.

Don't know how many people had a years worth of emergency funds? .. I'm guessing not many

Not knocking renters here, but no equity to tap into.

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You can be a renter an still have some Monies stashed away, I do and so do a few of my Friends. Not everyone can or wants to buy a house for whatever reasons, but that doesn't prevent a person from being responsible and putting Money aside for a rainy day. Rather than living to impress strangers, or for whatever reasons.

[Kforce]

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@Anonymous wrote:

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@M_Smart007 wrote:

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@SouthJamaica wrote:

A debt crisis looms as renters turn to credit cards to stay afloat

Experts worry people may be destroying their credit to make ends meet during the pandemic.

https://crosscut.com/focus/2020/09/debt-crisis-looms-renters-turn-credit-cards-stay-afloat

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I wondered what would happen, when people run out of unemployment and stimulus monies.

Don't know how many people had a years worth of emergency funds? .. I'm guessing not many

Not knocking renters here, but no equity to tap into.

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You can be a renter an still have some Monies stashed away, I do and so do a few of my Friends. Not everyone can or wants to buy a house for whatever reasons, but that doesn't prevent a person from being responsible and putting Money aside for a rainy day. Rather than living to impress strangers, or for whatever reasons.

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+100

From a few years into my first job, I set aside many months worth of money for an emergency.  Let it grow every year.  Earthquake, fire, war, pandemic, zombie's, alien's, job loss, etc.  It is no secret, recommenced by all, investors, survivalist, parents, google, everyone.  Save for the day when you need it.  PS: I also had a stash of toilet paper.  One needs an emergence fund, and not having one leaves only yourself to blame.

[SouthJamaica]

Personally I don't think we should be blaming people who don't have an emergency fund stashed away.

This country is a tough town, and a lot of people have it rough.

[iced]

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@SouthJamaica wrote:

Personally I don't think we should be blaming people who don't have an emergency fund stashed away.

This country is a tough town, and a lot of people have it rough.

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I think the point some are trying to make is that when someone has no savings stashed away but they have a 4K TV, a recent iPhone or Samsung, more bedrooms than people living in their home, and a late model car in their driveway, all bought on credit they can't PIF... well, they don't get to claim they have it rough and it wasn't their fault.

Those who are scraping by with a flip phone and 3 roommates in a 1,000 square foot apartment aren't the ones being blamed. It's Mr. Middle-Class-Who-Thinks-He's-Upper-Middle-Class who is, and there's a lot more of them than there are 3-roommaters with 15 year old phones.

[Anonymous]

Yeah it wasn't my intention that people who are unable to put Money aside are irresponsible, and didn't think that needed to be covered. I know several people that barely make ends meet living on a limited budget who don't spend frivolously, and haev even been there in the past myself.

However, those are generally not the people who can get into a mortgage, auto loan or bank note beyond their means only to have the rugged pulled out in times like these. In most cases those people will still be under the radar because they're not in debt, just as they were unscathed during the housing crises. While they may not have a nest egg, they would have had access to unemployment/foodstamps as well as other resources not to metnion the $1,200 stimulus. 

And to a resourceful person there are always jobs to be had somehwere.

[CA4Closure]

I was flat broke in 2010 but I learned a valuable lesson. My reserve cash in the bank is now over $650,000. My 401k was rebuilt thanks for a well paying job after my financial collapse. Today I have other financial means to support myself if I ever become unemployed. Rental units and commercial properties that bring in great monthly income. 

My stocks are doing very well so if Social Security collapses, I will be ok in retirement. I am not relying on Social Security in my retirement. Rental income will be my major source of support. 

[adelphi_sky]

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@SouthJamaica wrote:

Personally I don't think we should be blaming people who don't have an emergency fund stashed away.

This country is a tough town, and a lot of people have it rough.

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People usually don't take the same paths in life either willingly or unwillingly. And let's be honest, this country doesn't make it easy for a lot of people to be financially secure. This nation's personal finance journey is wrought with precarious pitfalls.