Calculated Risk is fond of going on about how many homes are "underwater" -- where homeowners owe more on their mortgages than their home is worth. It seems like something we should keep an eye on but I disagree with the conclusions they consistently make stating that these homeowners are likely to default and/or "mail in the keys".
People buy a home for a lot of reasons. One is an attempt to make a smart investment. But, in most cases, that investment is a 20 to 30-year investment, not a 3 to 5-year investment. More importantly, people buy a home to have a place to live! They are not going to simply mail in the keys because their house lost value.
For starters, they often don't even know if the home is worth more than they owe because they don't know how much they owe at any one time. They might know the house has decreased in value but that doesn't mean it's worth less than they owe. And, it also means people have to give up on their dream of home ownership, something many are unwilling to do.
Calculated Risk is a great site, but I think they're taking too many liberties extrapolating on a short-lived, geographically-focused phenomenon. i wonder if there's any historical evidence of folks doing this in past housing busts. If not, then Calculated Risk should consider much more likely factors in defaults such as job losses and catastrophic payments.