Fifty-three percent of Nevada homeowners who defaulted on their mortgages claim that unemployment caused the default. That leaves a whopping 47% of Nevada homeowners driven to default for reasons other than unemployment: Theory says they defaulted because they were underwater.
Unemployment remains a key cause of default states a Neighborworks Report. Of the homeowners receiving foreclosure counseling through the National Foreclosure Mitigation Counseling (NFMC) program, 58% listed unemployment as the main reason for default.
THE DATA SUPPORTS THE THEORY
Prior reports on causes of default indicate negative equity to be an increasing factor in causing mortgage defaults. It appears that the dual variables of unemployment and negative equity are the two leading causes of default. That conclusion is supported by economic theory.
DEFAULTING BECOMES AN ECONOMIC NO-BRAINER
From an economic point of view, the vast majority of homeowners are far better off defaulting on an underwater home than continuing to make the payments- even if they can. If an underwater homeowner loses her job- its an economic no-brainer to default.
With 70% of Las Vegas homewners underwater, and a 14% unemployment rate the lion’s share of Las Vegas homeowners will have lost title to their home before this crises ends.
