A reoccurring theme here is that borrowers tend to hang on even though the economics of the deal suggest it would be better to walk away (see, for example, this post). Via Deal Junkie, a MarketWatch interview with a real estate investor explains why better than I could. The money quote is at 2:18 in the interview:
People that take a long term perspective and have a reasonable expectation on their capital are going to make a fortune. Simply, it’s historical. They did it the last time, and they did the last time, and they did it the time before that.
It’s true, the investors who bought distressed assets during previous real estate recessions have ended up making a lot of money. Borrowers hang on until they can’t because the market has come back from previous downturns, and if they can ride out the storm they will be the ones with the fortune. The idea of someone else making money on an asset you used to own is a powerful motivator to persevere.
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