Just walk away?

Facing Default, Some Walk Out on New Homes - New York Times. OK, so I see the short term logic of jingle mail. You're upside down, so you walk, take the hit to your credit history, and rent at a lower payment than your mortgage. There isn't much dignity to a decision like that. There's no "tough it out spirit of the greatest generation" flavor. It's a morally suspect tactical move. Then again, whoever really believed that Americans were paragons of virtue? It's fitting behavior for Bush country.

Here's the economic reality check, though. You don't think those tarnished credit records are going to plague the jingle jangle crowd? The banks and mortgage companies are fighting for their lives too. And they will find ways to get their pound of flesh.

But what I'm really thinking about are those home rentals. We have on the one hand a multitude of homeowners bailing out on their mortages, flooding into the rental market. We have on the other hand a multitude of distressed homeowners (including banks) who can't sell their cliff diving properties and will be forced to rent out the homes they cannot sell. As the demand for rental homes rises (jingle jingle), there should be supply to fill the void (all those unsellable houses), but here's the catch: there is financial incentive to prop up the rents to keep pace with the mortgage payments so those properties don't get foreclosed. Banks need to preserve capital to stay solvent. I do not see any incentive for them to drive rents lower. I see every incentive to push rents higher, and if demand for house rentals stay high, our genius jingle mailers are going to be paying higher and higher rents, probably approaching what they would have been paying had they never walked away. There is no escaping the undertow. This whole housing crash reminds me of a musical chairs game. Somebody's going to be left without a chair to sit in.

Let's say housing bottoms out and home prices become reasonably affordable again. Those with shattered credit histories are not going to get the mortgages so easily. Banks will remember who left them holding the bag. Instead, the ones who walked away may be stuck in rental purgatory for a long time.

Is my reasoning flawed? If so, edify me.