'Underwater' vs. Foreclosure

"'Underwater' Need Not Mean Foreclosure"

That's the title of a nice article in today's Wall Street Journal. The article's author makes the point -- which I have observed -- that most people who owe more than their home is worth keep making payments, regardless.

Assuming they can.

According to the article, the two biggest factors causing people to mail their lender the keys (so-called "jingle mail") are financial wherewithal, and the expectation that their home price will eventually recover. Of course, homeowners who default know -- or should -- that their credit will be wrecked for years to come.

Future Expectations Key

So what does the foregoing tell you about likely foreclosure rates this cycle?

That the key is whether "underwater" homeowners view their situation as temporary or permanent.

By that reasoning, areas of the country with rosy long-term outlooks, like San Diego, Boston, and Denver, will likely experience relatively fewer foreclosures. Declining, economically depressed cities like Detroit will have it rougher (what's new??)