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Facing Default, Some Walk Out on New Homes
By John Leland
New York Times
Feb 29, 2008

“Though many states give banks recourse to sue borrowers for their losses, Mr. Case said, in practice it’s not often done “It’s tough to do recourse,” he said. “It’s costly, and the amount of people’s non housing wealth tends to be pretty slim.”

Christian Menegatti, lead analyst at RGE Monitor, said the firm predicted more homeowners would walk away from their homes if prices continued to drop, regardless of their financial circumstances. If home prices drop an additional 10 percent, Mr. Menegatti said, 20 million households will owe more than the value of their homes.

“Will everyone walk out?” he said. “No. But there’s been a cultural shift. Buying a house used to be like entering a marriage, a commitment for life. Now, if you see something better, you go back into the dating market.”

When homeowners see houses identical to their own selling for much less than they owe, Mr. Menegatti said, “I wouldn’t be surprised to see five or six million homeowners walk away.”

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Tomnitz: Foreclosures Will Make 2008 Worse Than 2007

Home builders beware: Expect 2008 to be worse than 2007.

That's the latest word from D.R. Horton CEO Don Tomnitz, who believes that the wave of foreclosures that will hit the market in 2008 when a million-plus subprime mortgages readjust will make for a very tough year.

"There's no question that 2008 will be worse than 2007 for us," said Tomnitz, speaking to a group of analysts this morning at the JPMorgan Homebuilding and Building Products Conference in Las Vegas.

On a more positive note, Tomnitz said home builders have done a great job adjusting prices and cutting costs through the downturn, so most builders are in a very strong position when they go head-to-head against existing-home sellers.

"That's the rosy picture here," said Tomnitz. "We can offer a new product at a more competitive price," he concluded.

During his presentation, Tomnitz said by working off inventory, adjusting its start levels, reducing lot position, paring down debt, and cutting costs D.R. Horton will emerge from the downturn a stronger company.