“Investors and first-timers have come in and out of the market throughout history at various times for various reason, but underpinning housing has always been move-up/across/down buyers,” says Hanson. “Half of the repeat buyers have died. They are down for the count due to negative equity, "effective" negative equity, low quality credit, or legacy 2nd liens they can't extinguish. This is a huge problem for anybody betting on ‘escape velocity’ or a ‘durable recovery’ in housing.”
The Royals could just walk away, as many like them already have. The Obama administration has been pushing its program that pays lenders to slash mortgage balances, but this week the regulator for Fannie Mae and Freddie Mac said the two mortgage giants will not participate. The administration claims reducing principal will keep borrowers from walking away. Fannie and Freddie’s regulator, Edward DeMarco, claims offering principal reduction will cause current borrowers to miss payments just to qualify. The Royals appear to prove both of them wrong. They won’t walk away and they won’t stop paying.
“I bought this house, I sat down, I signed the paperwork, I knew the numbers, and so I've made my payments as committed, and I don't want to stop paying to create a situation where the bank wants to get me out of the house. I'd rather do it in a way that's fair to both parties,” says Jason.
But the Royals also won’t move, and therefore won’t be able to contribute to the housing recovery.
Questions? Comments? RealtyCheck@cnbc.comAnd follow me on Twitter @Diana_Olick