Preventing Strategic Default

29 Pages Posted: 30 May 2012 Last revised: 12 Oct 2012

Brent T. White

University of Arizona - James E. Rogers College of Law

Date Written: October 12, 2012

Abstract

Strategic default is driven in significant part by homebuyers’ expectations at the time of purchase. When individuals purchase homes primarily as investments, with the expectation of appreciation, they will experience marked anxiety when home prices decline. A significant number of homeowners will strategically default as a result. In addition, when investment rationales motivate the majority of homebuyers within a given market, housing booms will tend to be exaggerated and down markets will tend to be prolonged. Strategic default – and housing booms and busts – can be managed by setting homebuyers’ expectations ex ante at the time of purchase.

Keywords: strategic default, anxiety, expectations, homebuyers

Suggested Citation

White, Brent T., Preventing Strategic Default (October 12, 2012). Arizona Journal of International and Comparative Law, 2012; Arizona Legal Studies Discussion Paper No. 12-18. Available at SSRN: https://ssrn.com/abstract=2070188

Brent T. White (Contact Author)

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

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