[2peaches2oranges]

Jim Cramer (CNBC) the other night says (in a nutshell) that

"if you are down 20% or more, you should sell or walk away...."

"...You just default, go rent. Keep your credit cards so you can buy...."

"...Don't compound your problems by continuing to pay...."

"Keep your job, car and credit cards....."

"Buying a home in 2006, was like buying Nasdaq in 2000....."

He mentions Florida.


How close are you to walking away if you cannot sell your home??

Cramer says "Walk Away"

Jim Cramer reiterating what he meant

What Cramer has been saying is just what he’s been saying— walk away. What else are you going to do? You can’t keep making enormous payments, you can’t sell it, you can’t rent for more than your payment, you can’t refinance it– no more wonky loans. It’s not worth what’s owed on it, so what other choice do you have?

It’s not going to increase in value for 10 years or more, so what he’s saying is walk away. Listen to what he says really close. He says something like “You wouldn’t keep a losing or worthless stock would you?”

[tallrick]

Unless my property values drop by 50% I am out of here. Perhaps real property tax reform will keep me here. Without a mortgage, a fall is good. I know several people with zero equity, so if their assessed values drop and the ARM's reset they will walk.

[momix5]

Do you mean foreclosure and bankruptcy? There are a alot doing it on Long Island New York, short sales have skyrocketed.Our local paper had a whole 3 day story about it. I have heard that if you do it in one state another state will not look at it so bad is that true?

[2peaches2oranges]

Not bankruptcy, he says just default on the mortgage loan, but pay for everything else and just rent.

[2peaches2oranges]

Transcript:

Torabi: "I have to bring up a video we did yesterday that was entitled ‘Walk away from your house’".

Torabi: "Jim Cramer says, y’know, ‘there is a time to walk away from your house’. To re-visit the video yesterday, you said, ‘when your house is down 20%, essentially, when you have no more equity left…’"

Cramer: "Right"

Torabi: "…that’s a good time to sell…"

Cramer: "Yeah"

Torabi: "… but what [unintelligible] because that"

Cramer: "Well not just sell, to walk away. You can’t sell it."

Torabi: "How do you walk away?"

Cramer: "Well you just default on the mortgage. It makes huge economic sense. You go rent. Uh, you don’t want to lose your job, so you keep your car. Uh, you keep your credit cards so you can buy, and all that really happens is is that you made a bet and you lost, so don’t compound it by continuing to pay."

Torabi: "Now the hierarchy of debt, you were saying also that y’know, your credit card debt should be less of a priority than if your house is losing value"

Cramer: "Oh, yeah, credit cards are much more important than your house. Remember, your house is only a good bet if you can build equity. But if you are going to lose money each month, you might as well rent. You shouldn’t own."

Torabi: "And, but, yesterday you’re also saying there are no places in this country where there is value in homes. A lot of homes are depreciating…"

Cramer: "No, No, there is no place where [mumble] you wouldn’t be down on your home if you bought it in 2006, that’s what the issue is. So, I’m saying that buying homes in 2006 was like buying the Nasdaq in February of 2000. They’re very very similar - it was better to be margined out than to continue to put capital against those Nasdaq stocks."

Cramer: "There was a report this morning by David, I believe it was David, uh, Blitzer, on, when I was on with the wonderful and fabulous Erin Burnett and it was that the, some housing prices have, uh, been, have actually stopped going down and some are going up and I just think that’s not true. I think, like, bad CDOs, and, like, bad leveraged loans, the actual mark to market is down everywhere. I get that from the 5 homebuilders whose conference calls I listen to. There are no up markets, and there are markets that are falling 20-30%, and those are the ones where it’s much smarter to walk away from your house."

Torabi: "Is the 20-30%… what’s that based on, or is that just…"

Cramer: "It’s where the, uh, purchase prices are, uh, when you back in the discounts. The discounts are very hard to see, cause all the homebuilders do two things: One is is that they offer incentives that don’t surface, so the list price is $250,000, but you’ll get rebates just like a car, so the list price of a car is $25,000, y’know, but you’re really only paying $18,000, so take in that, and the second thing is is that there’ll be Realtors, and what’ll happen is is that you’ll say ‘look - the list price is $225,000′, but you can negotiate down and go $190,000. I’m using the negotiable prices.

Cramer: "This is happening in the inland empire, in Sacramento, uh, it’s happening in Phoenix, it’s happening in Denver, and it’s happening in Las Vegas, and in southern California, uh, anywhere near the bread, the so-called bread basket, Modesto, these are all places where there’s tremendous overbuilding, and where it may pay to leave your house."

[momix5]

holy crap, I looked at the clip i guess it makes sense, but won't it kill a person's credit?

[2peaches2oranges]

I guess your credit is gonna get killed anyway if you can't pay your mortgage, taxes and insurance.

[momix5]

I guess this is true, I read a story where somewhere in the midwest people were doing this because the are got so overidden with gangs that they could not sell so in fear they walked away. I would too in that sense of being unsafe.

[Hero]

wait.. he said, very quickly, that if the feds res decreased the rate by 1 point, things would reverse. can someone explain the significance of that and the likelyhood of that happening? thanks..

[yukon]

It's the lenders I don't understand. How is it better to put a home in foreclosure and risk selling it at a loss, than to work with the buyer on an interest rate they can afford and rewrite the loan?