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Nearly three-quarters of economists surveyed said they would continue making their mortgage payments even if they were deeply underwater, ""Zillow"":http://www.zillow.com/ reported Thursday.
[IMAGE]Strategic default, which is when homeowners decide to stop paying their mortgage even though they can afford it, is oftentimes motivated by negative equity.
In Zillow's Home Price Expectation survey for June, 71 percent of economists said they would not choose strategic default, even if they owed at least 40 percent more on their mortgage compared to the home's current value.
The survey, which was conducted by ""Pulsenomics"":https://pulsenomics.com/, included 114 responses from economists, real estate experts, and investment and market strategists.
The industry experts were also questioned on their position concerning a government-sponsored program to forgive principal for underwater homeowners.
Coming close to the percentage of those who said they would not strategically default, 72 percent said they opposed a principal reduction program, while 28 percent were in favor of one.
""These survey results suggest that economic and financial considerations are not the dominant drivers of behavior for even deeply underwater borrowers,"" said found of Pulsenomics, Terry Loebs. ""This underscores the challenges in valuing underwater mortgages and in determining the costs and benefits of principal forgiveness initiatives.""
In a different Zillow survey involving homeowners, not just economists, 59 percent of respondents said they would not strategically under the same conditions.
Thirty-seven percent of homeowners who said they would not strategically default cited moral reasons, while 35 percent said it didn't make sense since they intended to live in their current home for a long time.
""We were initially surprised that so few economists would be willing to strategically default, since when you do the math, it can often be the best economic choice, if you leave aside moral and ethical considerations,"" said Zillow Chief Economist Stan Humphries. ""Of course, strategic default is not just a mathematical decision. The most common reason for avoiding strategic default cited by homeowners was that it is a moral issue. That likely comes into play with economists and analysts, as well.""
According to ""Zillow's first quarter Negative Equity report"":http://dsnews.comarticles/zillow-one-third-of-homeowners-underwater-9-out-10-current-2012-05-23, nearly 75 percent of underwater homeowners owe at least 40 percent more than their current home's value. The report also stated that 15.7 million, or 31.4 percent, of U.S. homeowners are underwater.
