The Upside of Nonpayment

There may be a sizable upside to homes in distress. Yes, it sounds cruel, but those who are not paying their mortgages are spending that money elsewhere, and that keeps the capitalist machine chugging along.

It’s called a “soft stimulus,” according to Las Vegas real estate analyst Frank Nason, who used to crunch numbers for developers during the boom, but today can’t keep his eyes off the bust. In a recent newsletter to local economists, the analyst pondered the economic impact of the roughly 8,500 owner-occupied short-sale listings that month in Nevada.

Even factoring in a low average monthly mortgage payment of $750, Nason says $6.3 million a month that, in ordinary times, would go toward our mortgage holders is instead being used to pay off debts or purchase consumer goods.

Could it be that the failure—or refusal—to meet our mortgage obligations is somehow helping keep the economy afloat? And when the mortgage rebels resume paying for the places where they live, could it be bye-bye, stimulus?

“Somebody,” says Nason, “has to be thinking of this on the national level.”