What's it like to know the 'value' of your home is dropping? And that your 'equity' is going away?
* Did you think of selling and then talked yourself out of it?
* Did you use the housing ATM and wish you hadn't?
* Do you blame the bubble blogs and MSM for calling the cops on the housing party?
* What interest rate are you at, and is your loan fixed or adjustable?
* When did you finally realize that home prices were tanking?
* If you had to sell today, how far from the peak has the price come down?
* Or do you simply consider your house a home, and don't stress about all this housing crash stuff?
November 19, 2007
Open thread for homedebtors
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67 comments:
I had an inkling they would be tanking when in a 9 month period, a search area around my house went from 7 to over 90 active listings.
But I guess this thread is not for me, is it? ;)
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I have a 15 yr mortgage at 5.375% and I owe $97,000 +/- from the year 2001. $1200 payment
The house was purchased for $134,000 and peaked at $300,000
No HELOC or anything like that.
Quality house, good location, it's home.
No credit card debt, one car payment.
I work there, my wife is home with me (married 12 years). No kids. Great food cooked by her, 2 dogs, 2 cats. And my wife and I actually like each other!
Sorry if too blissful, she is cooking MEAT right now!
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I love the word "homedebtor"
None of them use it, lie to everyone they "own"
my house has always been my home - never my retirement, atm or anything other than a place to raise and shelter my kids, i live in scottsdale (not north scottsdale) and love it( been here for 17 years). i am a builder and tore down an older house and built the house we live in and was ALWAYS told "buy a house because you want to live in it"- all other reasons are secondary and it is proving to be true.
Sorry if too blissful, she is cooking MEAT right now!
LOL.
YJM, this is the way buying and owning a house should be done. Congrats.
Im waiting for the house i sold in 2000 to get down to those levels then i might buy it back,or at least make a lowball offer.
30 year fixed at 4.875.
$1135 a month + $300 dues.
No HELOC, no credit card debt, no car debt, some school loans.
Bought 5 years ago at 227K, don't expect prices to go to 2002 levels, but if they do - don't care, have no plans to sell. Similar property peaked earlier this year at "about 400K" (or so the seller said).
"* Did you use the housing ATM and wish you hadn't?"
I personally know of two people at my job that used their house as an ATM. They pulled all the equity out of their homes to finance their expensive cars, shopping sprees, and vacations during the good times. Now, they're ducking bill collectors and repo men; their home's value has dropped tremendously. They couldn't afford to sell the house for the lowered value so they held out hoping for a miracle until they finally had to start the foreclosure process. I was discussing the upcoming Christmas season and one of them is maxing out the last few credit cards that have any remaining credit so her kids will have gifts this year.
Own home outright.
Property tax and insurance brings my monthly payment for housing less than $300 and this is in California. I don't worry about my equity.
Minneapolis. Bought in 2002...was worried about the bubble then. Bought 199K....peak "value" about 250K early 2006...probably 235K now. Put down 20K...got a 20 year for 5.375 and now owe about 153K. 1 car payment. No other debt.
I think it will work out but I'm not counting on that equity for anything. Also not plowing money into the home even thought it would not be hard to spend about 10-20K.
One thing not talked about on this board is that the out of control inflation (10% if we are honest) in this country may prop up prices more than they would if we had 2-3% inflation. They may not crash as much as we think. Probably about 20% drop over 5 years.
* Did you think of selling and then talked yourself out of it?
Yes, but I only paid $40,000 for my condo. My monthly payment is under $400, and I owe $1,000 on it.
* Did you use the housing ATM and wish you hadn't?
Heck no to the first part.
* Do you blame the bubble blogs and MSM for calling the cops on the housing party?
Irrelevant. The housing market is in its current position because of speculation, vs "investment". Media reporting should only be blamed for fueling the speculation flame. Reporting on bubbles popping will help those willing to see get out early enough to save their principal and take profits. Everyone else is left empty handed.
* What interest rate are you at, and is your loan fixed or adjustable?
15 year fixed @ 5.25%, $1,000 left to pay. After December, I'm debt free!
* When did you finally realize that home prices were tanking?
January 2006.
* If you had to sell today, how far from the peak has the price come down?
I'm in an area where prices have been flat this year. I'm up about 30% over the last three year period.
* Or do you simply consider your house a home, and don't stress about all this housing crash stuff?
Absolutely. I don't see my house as an investment in the sense that it can provide an income for me, unless I'm a landlord (which I am not). I still hold onto the belief that landowners hold power over those who don't own land. That was the belief in past centuries, but everything has become so out of whack that homeowners are really slaves to the banks. The US, and probably the UK, would be better off if the people owed nothing to lenders.
I bought a house for 70 K I put about 50k into it by adding 750 sq ft/ 3 additional rooms and new flooring and added a bathroom. I am into the house for 125k total and have a mortgage of 530 with a balance of 81K. My house is now 2300 sq feet and I can walk to the small downtown, the library the hospital, grocery store and any thing else in town
I put on less than 250 a month on the car which is paid for.. This is less than 1 tank of gas it mostly goes for running 5 kids to activities.
I never care or cared if my house goes up or down in value as I use it to live in and never thought of it as an investment.
WIth 5 young kids renting an apartment is a no-no and renting a house like mine would cost me about 800 a month.
My property taxes are about 120 a month so overall I own a nice house for about 200 a month less than renting cost me so I have no qualms being a homedebtor.....but than again I am smart. I sold my big fancy house in june of 05 and miss none of its amenities including the mort and the taxes
Move to a small town buy a nice house for under 100k and get a half azz job and you will be fine, with more left over at the end of the month than if you make 120K with a giant mortgage
Just sayin it worked for me and it is much much nicer lifestyle
Plus oil running out and gas about to surge you suburbanites will not be able to afford getting home form your jobs/////you will be sleeping in your car and washing up in the restroom and only going home on the weekends....why did you dothis to yourselves??????
Cheers
My house is just a home, but GOD DAMN! did it ever get more expensive to heat!
My gasman filled me up today, hasn't been around since March, and the price of propane almost TRIPLED! I talked to my neighbors some of whom have different gas companies from mine, and the story was the same.
As he filled my tank, he took out one of those all-purpose pliers and carefully vented the air out of my tank as he filled it. With the air that accumulates in the tank, it usually can only be filled to about 80%. He never took the time to do this before, so I asked him why, since in 25 years, I have never seen the needle pegged clean off the dial past 100%full.
1. Company profits are way down, and they are not selling as much gas. Business failures and empty foreclosed buildings don't need much, if any, heat so they are really squeezing in every drop that they can. I have worked in the gas industry, and I know that the guy at the bottom of the energy food chain doesn’t make that much per gallon, and has to hustle for his buck.
2. All of their propane trucks run on, you guessed it, propane, and all the drivers are under the whip to keep time and mileage down between deliveries, since that high priced stuff powers their vehicles as well. More gas in customer’s tank, longer time between fill-ups!
I can afford it, but what's going to happen to the elderly, and others, on fixed incomes, or the neighbors who simply CAN'T afford it?
Multiply this sticker shock a couple million times across America, and watch Christmas spending really tank, major big time!
At least, those Americans with any brains will limit their spending, for the rest there’s
MasterCard.
What's that you say Benny, a devalued dollar and skyrocketing oil prices won't affect you as long as you don't buy outside the U.S.? You bought and paid for DUMBA$$!
* Did you use the housing ATM and wish you hadn't?
Yes & Yes...I fell for the Home Equity 2nd Mortgage Scam in 1998 but used the proceeds to finish the upstairs on my home. I immediately realized I had been bamboozled and would be working harder for the bank than the Hebrew slaves had to work for the Pharaoh building the pyramids. Got out of both mortgages when I sold at the peak in 2003...Will NEVER be suckered again.Owe less than 50K on the current home...Happy & waiting out the storm
PEACE
We have a 15 year mortgage - 9 years left. We like the neighborhood - have 3 kids in a great school a block away, close to family and friends. We view our house as a home, plain and simple. Also, our home costs are less than a comparable rent.
Our peak home value was $750,000. We bought the house for $350,000. We could probably sell if for $625,000, but only an idiot would buy it for that price. I fully expect the value to drop under $500,000. (We live in Orange County, CA)
We will be fine. We don't rely on our home for our retirement or college funds, etc. It's simply a place to live.
Can't say that for a lot of people around us though. Many maxed out the equity in their homes or put no money down on the purchase.
It is pretty grim.
Thankfully, we have always been a live within our means/cash only customers, so life is good!
Fixed rate loan. It's a home, not an investment. I probably should have kept on renting, but rent was going up and the bank is far more pleasant than a meddling landlord and management company.
Your Jewish Master--
WHOA--$134,000 for a house? You couldn't get a basic studio apt. in Northern VA for double that...good for you.
It's a good message though H.P.kids--Keep the monthly nut low, live within your means and enjoy the important things in life like loyal, fabulous dogs and wives or significant others who can cook up a dinner so good that you don't care what is going on in the outside world...That's the good shyyyt.
And remember--just enjoy your life...As some wise man once said--"No one ever died wishing they woulda' spent more time at the office". My office laid me off the day before yesterday, but I am looking forward to Thanksgiving with family, no matter what.
Happy Holidays to all--
"buy a house because you want to live in it"- all other reasons are secondary and it is proving to be true."
Exactly. And Keith, didn't you say just a few days ago that, in your opinion, prices might not drop all that much in real terms due to the falling dollar? My mortgage payment is fixed for the next 7 years. Is your rent fixed for that long???
Signed contract to buy (in Denver) in March 2005. Asking price was $349,900. We paid $320K, 30 yr fixed at 5.125%, no points, no pre-payment penalty, $60K down pymt. Sellers wanted to put off closing till June. I realized by then that things were starting to smell bad in the housing market and thought of getting out of the contract, but decided to do it anyway. Other comparable houses within a couple doors of mine have sold since for $50 to $60K more. According to Zillow, this place hasn't lost any value (yet.)
It's a nice vintage house, big lot, 2 car garge with 400 sf shop, huge trees, flowers, sprinkler system, wood-burning fireplace, basement, and the PITI is the same as we were paying in rent.
We'll likely never be forced to sell (self-employed) so unless the sky falls completely we're probably OK. And if the sky does fall completely, I'm thinking the social collapse will keep the cops worrying about things other than homedebtor's late payments.
If we manage to muddle thru this economic mess, eventually RE will regain value, so it's just a matter of waiting it out. Of course that also depends on where you bought. Tract mansions in CA, FL and Vegas may not ever see their 2005 highs again.
As far as home equity loans, never took one, never will. A 1st mortgage is all the interest I want to pay to bankers, and I plan to pay this one off in 15 years. No credit card balance, no auto loans.
As far as how it feels; if we'd bought a pretentious McMansion I'd feel silly. We didn't. It's a cozy 1920s bungalow in a good neighborhood with hardwood floors. Very homey. We're happy.
Jewish Master said:
I work there, my wife is home with me (married 12 years). No kids. Great food cooked by her, 2 dogs, 2cats. And my wife and I actually like each other"
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I just have one question for you? Do your 2 dogs and 2 cats serve as replacements for real children?
Just asking.
Bought for 135k in 98. Refied in 2003 at 5.5% 30 year fixed at 190k. Took the 55k to help buy a building with a 3000 dollar a month cashflow. That cashflow pays my mortgage on my primary residence, and health insurance( a bend me over 11k per year) House would appraise for 300k today (330k last year). We really love our home even though the construction sucks. It's in a great area with great schools, and only 15minutes any way to all our rentals. Don't have a rental property at more than 60% LTV, and can almost live on the cash flows. I'm real glad I didn't let my wife talk me into the 550k Mc mansion when I was making 140k a year as a Realtwhore. We might buy the Mc Mansion as a short sale in a year or 2 and rent this house for 2k per month to cover our new mortgage.(trying to sell will be difficult) If shit falls 20% we are OK. I just hope we can raise rents over the next 5 years. Taxes and utilities are brutal.
Bottom feeder in Philly
This house has lost 220K in 18 months!
Put Countrywide down for one more forclosure.
Public auction:
4 Bd 2.5 ba colonial 2 car garage on 1/4 acre level lot.
Starting bid:
525,000.00 (loan balance)
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Ask your tax advisor about puting your life savings into a tanking house of your own************
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****seller financing available***
rates are fixed at 30% for 10 years
and are subject to a 50% downpayment and a FICO score of 1200***************************
****visit us on the web at********
www.angeloshouseofcards.com
I did a 110% cashout refi with a teaser rate in fall 2005 and I'm going to walk away when the rate resets. The comps in my neighborhood are already down 30% so I don't give a shit anymore. When Congress passes the tax forgiveness bill, I'll stop making the payments and live in the home for free until the lender forecloses. My fiancee already owns a house that her parents gave to her when they retired, so I'll just go live with her. I got $270K tax-free plus 6 months of rent for free thanks to the housing boom. On top of that I was paying a 4% teaser rate I/O ARM for the past two years. I traded in my 700 FICO for what amounted to $300K. I'll start rebuilding my credit and in 5 years it will be back to 700 again. Good deal, eh? HAHA
I just checked public records to see how much my big shot real estate investor neighbor has to pay in property taxes at the end of the month, for his two side-by-side condo units. The bill due is an astonishing $18,000.
Wow, that's for condo units with 2 and 1 bed. Add to that an ever increasing home insurance, condo assessments, and HOA of $6,000 per year.
He lives in the Northeast but decided to be Donald Trump in another state, by acquiring two condo units that serve as a second home. I haven't seen him for a while since the housing bust started. Strange that, in the past, he was here already for a long two weeks Thanksgiven vacation, playing the roll of big shot real estate mogul. First time we met during the housing Ponzi Scheme, I told him that I had sold and now was renting. You should see his face; he almost spitted on my face in disgust. Like I was a low life for renting.
We are not even considering his housing expenses in NYC. So he's paying almost $30,000 per year just to hold to those two assets that are sinking in value every month. Did I mention that the building was built in the 60s and it's showing its age?
Just another big shot wannabe getting hammered. I suspect that he got a HELOC from his main home to buy those two units, right when the Ponzi Scheme started.
Meanwhile, I rent a comparable unit next door for only $900 per month, including A/C, gym, cable TV, beach, pool, secured garage, concierge, 24 hrs security, etc. I made sure that my rental was from an old lady who bought the unit back in the 70s, which kept the property taxes low because of her 3% cap. Thus, my landlord doesn't have a huge property tax to pass on to my rent.
What did I do with the huge savings? I followed Schiff's advice long time ago and invested in precious metals and income earning assets overseas, which are giving me a very generous and steady return. Just the currency valuation alone against the dollar is 10% YTD.
Just watched NBC with Brian Williams covering the housing bust. Glad to see that MSM is catching up.
They showed the chaotic housing bust situation in Orlando. Air conditioning installer had 900 employees and just laid-off 500 of them, so far. Title woman used to have 50 jobs per day and now she's lucky if there are 3 per day, which forced her to reduce staff from 10 employees to just 1, her secretary.
Thank god that, according to your very reliable government, unemployment rates are sooo low. [/sarcasm]
1) Bought at peak 2 years ago so selling is not really an option anytime soon
2) No
3) No, it was bound to happen, though I do wish I discovered (and was enlightened by) HP a few months earlier than Jan 06
4) First house, fixed, 6.5%
5) About 9 months after we moved in - houses on the block were/are taking much longer to move
6) About 8%. Luckily we bought a rather inexpensive home by today's standards (139k) so a significant drop won't be quite as devastating as the people stuck with houses 3-4x the price.
7) It is a home for the wife, myself, and our dog. I stress about a lot of things, but the house won't really be an issue unless we decide to get up and move to another state suddenly.
Thanks to the falling prices of homes, I was able to get my taxes cut by 30% during this years reappraisal (yeah, comps!). Given that Texas has no income and only property taxes, this was rather significant savings. I bet you don't hear a lot about that in the news....
So, no, I do not mind at all if my house is now worth less than peak. Even at new prices, I am no where near underwater. I could not rent a place like this for my current mortage/insurance/tax nut. So I guess that puts me in the "don't stress over it catagory".
I don't know who said it, but I've found this to be true:
"You generally make money based on how well you purcashed something, now how well you sell it"
IE, if you bought at peak prices, you did a poor job buying....
Bought in 2001 for $295K, made a $150K downpayment, so monthly payments are relatively light. Probably could have sold a couple of years ago for over $500K, but thought I wouldn't be going anywhere, and I like the house. Here's the kicker: I'll probably be leaving the state for a new job in a couple of months (don't know for sure yet). If I do leave, and can get a sale of over $400K, and within a short time, that would be great. I'm up against the unknown here...
I bought my home for $180K in 1998. Comparable homes in the neighborhood have sold in the $400K range for the past year. I'd say now the homes are worth in the mid $300Ks, which is about a 20% drop.
I paid my home off last year and my property taxes are lowest in the state ($2400/year).
I'm nice and comfy, despite the fact that I know my house will probably drop another 20% in value, I have no plans to sell it for the next 30 years, I'm going to ride this one out and watch my neighbor who borrowed against her house 3 times in the past 2 years to redo her kitchen panic.
Kieth,
None of the above...I RENT!
RayNLA
One thought about home ownership-- during times of high inflation it pays to be a longterm debtor. You are promising your lender to pay them back with a fixed amount of dollars which, over time, are worth less and less.
I believe that the Fed has been printing money rampantly, and that we are heading toward high inflation, no matter what the official BLS statistics tell us.
Looking forward to paying off the rest of my home loan with Monopoly money.
Katie in Houston
This of course means that my housing and distressed asset dollars are appreciating while my gas and food dollars are shrinking.
This makes the safety of worthless t-bills, CD's, and US$ look pretty good.
"What's it like to know the value of your home is dropping? And that your equity is going away?"
This is a mean-hearted question.
It’s like the T.V. reporter who asks the sole-surviving mother of 5, after a fire wipes out their home and kids, “So, how do you feel?”.
"Live like no one else today, so you can live like no one else tomorrow."
When I was younger I worked 2 jobs and saved, and saved. Worked and saved while my friends spent and partied.
Paid cash for new house in Central FL back in 1987 for $80K. Sold it in 2004 for $176K.
Moved to Southern VA. Paid cash for larger, older home in lovely neighbor hood across from golf course for $147K.
Have continued to work and save. I have everything I need and zero debt. I plan to retire very comfortably in my mid 50's
There were many times I've been green with envy. I've watched my friends drive nice cars, dress better than me, take exotic vacations, live in McMansions.
None of them will ever have enough to retire. It is too late for them to catch up. They'll be working the rest of their lives.
Now guess who envies me?
I bought a nice condo in Orange County in 1997 for 125K, saw the values more than triple. We sold in early 2007 in only 10 days for a premium. We then moved to Europe to attend to my ailing mother-in-law. That is the reason we sold, plus we wanted to get out of California.
Being in the real estate business, I saw the writing on the wall back in 2005-2006. We will relocate to another state when we return next year and will rent for the foreseeable future.
Now I only have to contend with the falling dollar.
Glad to be on the sidelines.
So many solutions, so little time...
Start publicly hanging guilty Politicians immediately. Make it a reality show. CAll it 'Hangman". Start with the top people at executive branch first. Begin with politicians immediate family, Wife, Children and Parents. Move down the trough quickly. Revoke all politicians passports at once. They are not to go anywhere....
Hangman, a concept whose time has come.
You can run but you cannot hide...
Dear "Anonamous"-- (Re: Dogs and Cats)--
YESSS YESSS and YESSSS-- I think I speak for a lot of people when I say that our Dogs and Cats are a fantastic replacement for children and we love them SO dearly--
Think about it--
They love you unconditionally, They don't need money for college, don't do drugs, don't ask to drive the car, AND if they get knocked up, you can sell the results......:))
Seriously, we love kids (Are great aunts and uncles) but we have always been realistic that they are a HUUUUGE responsibility, and liability, especially in this crumbling world of ours. I don't think I could bring kids into the world now (For THEIR sake)--Just think what it will be like in another 10 years at the pace we're at now.....YIKES!!
Yes Siree-- My dogs and cats are the loves of my life, next to my wonderful spouse.
but rent was going up and the bank is far more pleasant than a meddling landlord and management company.
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Is that ever true and one of the only reasons I bought last Sept. with a fixed low rate, stated.
I bought a really tiny new place in the city. Beautiful. Can't lose a lot if I didn't spend a lot.
* Did you think of selling and then talked yourself out of it?
No more than a fantasy of selling my house and buying it back later for $50k less. I'm glad I didn't
as prices have not come down enough to make that
work.
* Did you use the housing ATM and wish you hadn't?
Yes and No. I paid off credit card debt that I expected to pay off with dot com stock option
profits that evaporated. Some expense related
to my wife's cancer came out of the house ATM too.
No regrets as the total I pulled out is less than 20%
of the equity I have. We would have to loose another 40% in value before I would need to bring
a check to the closing table.
* Do you blame the bubble blogs and MSM for calling the cops on the housing party?
Here is what the Boston Globe is saying about my area: http://tinyurl.com/2dugdr
I have known for quite some time that the prices were out of wack. I'm glad I've got the equity so that I can undercut the market price for a quick sale
if I need to. The MSM helped me out there when they bid up the price since I bought in 1992.
* What interest rate are you at, and is your loan fixed or adjustable?
6.25% fixed 30 year. We will start paying it down faster once we get other debts paid down.
* When did you finally realize that home prices were tanking?
I saw it first hand in 1981 in Detroit. Saw it again
here in Boston in the late 80's after the mini-computer companies failed. I was telling people not to buy back in 2002 due to the unsustainable rise in prices. It started to turn here in early 2005.
* If you had to sell today, how far from the peak has the price come down?
Hard to say. There are so few good comps. I'm
guessing we are at about 5% down from the peak
now. We seem to have stabilized lately. The
local inventory was highest at the end of 2006 when it was 355. It is at 282 now up from 200
this Summer. Most houses around me are empty
nesters with paid off mortgages so foreclosures are unlikely nearby. Forcloseure.com shows only 3 active here, all on the "wrong side of the tracks".
* Or do you simply consider your house a home, and don't stress about all this housing crash stuff?
We bought at a price that would allow us to qualify
on my 1992 pay alone (at 8.25% 10% down). We could not rent a house like ours for $600 more than
we pay now. Owning has worked very well for us
and I expect it to continue to. We have no desire to move but if we have to, it is nice to know we have flexibility in pricing.
I consider my house a home, and don't stress about all this housing crash stuff.
Bought in 1993, $86,500 borrowed for a new family room and bedroom, and pool, 30 year fixed @ 6% T&I $1,345 a month...no other debts...I like to keep what i earn.
I was pretty foolish when I was in, and first got out of, the USAF.
It started with a $600 limit credit card in 1987.
By 1997, I had $22,000 in consumer debt. I took a second mortgage (125%) on my $106,000 house at 15%. We immediately bought another car, and we ended up racking up the credit card debt again.
We refinanced twice, once to a 20 year loan, and once to a 15 year loan. When we did the 15 year loan, we wrapped in the second mortgage. "Aggressive appraising" (as they called it) got our house value at $154,000 in 2003. They loaned us $120,000 (to get us under 80%) to cover both mortgages.
I'm now 41 and my wife is 44. We now have about $93,000 left on a house in a neighborhood where the ranch houses are selling for about $135-140k. We have one credit card bill, and one $7,000 car loan left. We're attacking debt with $2k+ a month right now. (We also have $140k in 401k, which we are in for long term). We are big on Dave Ramsey's advice now, so we are working hard to pay off debt.
Although I have been a little guilty about envying some of my high-flying colleagues, I'm now glad that we have taken to living more frugally. Even if our house value drops 25%, and gas and food prices double or triple, we should be okay.
One last thing for those of you smugly laughing at people who brought calamity on themselves: as usually happens, they've managed to bring it on ALL of us! This won't be fun for anyone!
Ahahaaha...Keith, I love HP, and visit daily - I pretty much agree with MOST of your take on things, but...I AM a happy homedebtor.
Not all of us bought during the bubble. Some of us have been homeowners for years...I bought my home in '98, during the tail of the last slump in my area - it was actually the local bottom of the market.
I have a 10 year fixed, at 5.125% (a no-cashout refi out of a 30 year fixed at 6.75%), with just three years to go. Sure, even with that killer financing, I paid more for my house than the nominal price, BUT, even with Goldman-Sachs projected 30% market pull-back for my area (Virginia), I'm still in the black overall. And, very shortly, my ongoing, long-term annual carrying costs (insurance & taxes) will be about 1/3 of what renters in my neighborhood are paying...for smaller houses.
There is no way I could afford on my salary (which has gone up since I purchased) to buy into the same neighborhood now. I would have been priced out - if not forever, for a very long time. All I can say is: this was a great deal for me...long term.
Of course, I was an early contrarian - as happy as I was to see my 'equity' rising so dramatically - and was objecting in '02 that prices were over-inflated, at least in my area/neighborhood.
I continued to drive my crappy old junker instead of cashing out to buy a new car, and ate bag lunches so I could make that bigger monthly nut on the mtg. and pay it down/off fast.
I agree with a lot of what you say, but...I nominally paid $215k for my house, and even with a 30% haircut, it'll still be worth $450k today. I'm about 20k ahead of what my financing has cost me.
I did get into a bidding war of sorts last year with a serious flipper/FB/HELOC-whore and a very greedy specuvestor (triangle). I had the specuvestor cornered - or so I thought - as he hadn't paid his RE taxes in 4 years, and I figured to pick it up as a tax sale, and had worked to persuade him the bubble was over and he was holding out for far too much - I even paid for an independent appraiser who used a bubble-price sale of an adjacent property to explain to this specuvestor he was 40% too high. But he told me "something is worth what someone will pay you for it" and found a Greater Fool angel to rescue him.
Now, she's underwater...and I think reality is settling in...I may just get the land for the post-bubble price afterall...she is a "home stager" so I know her income is in the crapper...and the court docs show she's a HELOC-whore...one never knows what's in savings, but she's underwater on her first home, and this land.
And yes, I've got a drawer-full of Kruggerands just in case it all really does hit the fan. "Cash is King" is BS when your Fiat Currency is hyper-inflating...which brings me to my second point: it's entirely conceivable to me that we have real stagflation, as in the current massive devaluation of the dollar, but without significant wage increases - just massively lower American Consumption. Home prices may pull back to the long-term rate of inflation, but other non-core items (food and fuel) will continue to inflate - we will consume less because our dollars are worthless and we eat less.
Inflation will get to you hiding in Europe too, when the great American stomach stops eating, and your prices either have to rise to offset decreased production, or you have to increase domestic consumption (and wages to pay for it) or both...ditto the Chinese...heck it already is hitting the Chinese. In the long run, American Tangible Commodities (ie, Real Estate) are good inflation hedges for the average joe (home debtors).
No doubt you are right: buying high and selling low are recipes for bankruptcy - and they are even worse when you borrow to accomplish them.
Ahahaaha...Keith, I love HP, and visit daily - I pretty much agree with MOST of your take on things, but...I AM a happy homedebtor.
Not all of us bought during the bubble. Some of us have been homeowners for years...I bought my current home in '98, during the tail of the last slump in my area - it was actually the local bottom of the market.
I have a 10 year fixed, at 5.125% (a no-cashout refi out of a 30 year fixed at 6.75%), with just three years to go. Sure, even with that killer financing, I paid more for my house than the nominal price, BUT, even with Goldman-Sachs projected 30% market pull-back for my area (Virginia), I'm still in the black overall. And, very shortly, my ongoing, long-term annual carrying costs (insurance & taxes) will be about 1/3 of what renters in my neighborhood are paying...for smaller houses.
There is no way I could afford on my salary (which has gone up since I purchased) to buy into the same neighborhood now. I would have been priced out - if not forever, for a very long time. All I can say is: this was a great deal for me...long term.
Of course, I was an early contrarian - as happy as I was to see my 'equity' rising so dramatically - and was objecting in '02 that prices were over-inflated, at least in my area/neighborhood.
I continued to drive my crappy old junker instead of cashing out to buy a new car, and ate bag lunches so I could make that bigger monthly nut on the mtg. and pay it down/off fast.
I agree with a lot of what you say, but...I nominally paid $215k for my house, and even with a 30% haircut, it'll still be worth $450k today. I'm about 20k ahead of what my financing has cost me.
I did get into a bidding war of sorts last year with a serious flipper/FB/HELOC-whore and a very greedy specuvestor (triangle). I had the specuvestor cornered - or so I thought - as he hadn't paid his RE taxes in 4 years, and I figured to pick it up as a tax sale, and had worked to persuade him the bubble was over and he was holding out for far too much - I even paid for an independent appraiser who used a bubble-price sale of an adjacent property to explain to this specuvestor he was 40% too high. But he told me "something is worth what someone will pay you for it" and found a Greater Fool angel to rescue him.
Now, she's underwater...and I think reality is settling in...I may just get the land for the post-bubble price afterall...she is a "home stager" so I know her income is in the crapper...and the court docs show she's a HELOC-whore...one never knows what's in savings, but she's underwater on her first home, and this land.
And yes, I've got a drawer-full of Kruggerands just in case it all really does hit the fan. "Cash is King" is BS when your Fiat Currency is hyper-inflating...which brings me to my second point: it's entirely conceivable to me that we have real stagflation, as in the current massive devaluation of the dollar, but without significant wage increases - just massively lower American Consumption. Home prices may pull back to the long-term rate of inflation, but other non-core items (food and fuel) will continue to inflate - we will consume less because our dollars are worthless and we eat less.
Inflation will get to you hiding in Europe too, when the great American stomach stops eating, and your prices either have to rise to offset decreased production, or you have to increase domestic consumption (and wages to pay for it) or both...ditto the Chinese...heck it already is hitting the Chinese. In the long run, American Tangible Commodities (ie, Real Estate) are good inflation hedges for the average joe (home debtors).
No doubt you are right: buying high and selling low are recipes for bankruptcy - and they are even worse when you borrow to accomplish them.
Keith - one more thing - on this adolescent Ron Paul "Libertarian" fantasy of yours...though I'm not keen on massive gov't market-meddling (the GSEs, for example, in particular, using them for a taxpayer funded bailout), you are living in a fantasy if you think the modern country can survive without the leveling of the playing field (finger on the scale) provided by the Federal Government since the days of TR. If you think we have 'class warfare' from the Democrats now, you're in for a real eye-opener if we return to the "Libertarian" era of people like Wm. McKinley.
Whatever the ugliness on the books of the GSEs, I suspect we will find that their accounting and business practices are significantly better than what has been parading around in the self-policed "free market" provided by unregulated and unfettered capitalism (aka REIC). Ron Paul Libertarianism is an explicit call for the total liberation of the REICs from any sort of restraint. They may be hurt in a crash, just like a bunch of drunk frat partiers get hurt doing stupid stunts which result in burning down the frat house.
That's all well and good and they 'get what they deserve', but the problem is, they'll burn your house down too, and that's collateral damage you can't easily avoid by picking your house up and moving it. This is why you need the government to come out and run everyone out of the party at 1AM, when it gets a little loud. If the GSEs are a way of doing that in the housing market, then they're a necessary evil.
We do not live in a Rand-ian theoretical fantasy world - and I say this as a former pot-smoking financial conservative - Rand was thought provoking...then I got a job, a mortgage, had to give up the weed and operate in the 'real world', which never quite matches the theoretical one...the differences are in small devilish details.
I bought in 11/2005 - I suppose you could say that was not the best timing :-/
I always planned on holding onto the thing, so the decreasing equity isn't a big deal, except the plan is to pay off in 15 years so I own what I live in when retired - and it turns out I will have to be more frugal than I like to accomplish this - I should have bought smaller and I'd downsize if the market was still good. Since the market isn't good and I only put 5% down, I guess I'll stay where i'm at. :(
Did 80/15 30 yr mortgages, fixed at 6 and 7 %. Mortgage broker tried to put me into some weird neg-am thing for the 2nd, I said "which part of 'fixed conventional' don't you get?". At least I did one thing right.
It's a good town, I can walk to the train to commute downtown, so gasoline prices won't hurt much. Could walk to shopping too, if I were a little less lazy - result is I've put less than 8,000 miles on my car in 2 years.
$6,000 in CC debt, being paid off at $1000/mo. (New furnace and A/C over the summer hurt.)
If I knew in 11/2005 what I know now I would have bought a smaller place or maybe would have stayed a renter. On the other hand I like the neighborhood, I walk to the train to get downtown where walk to my job, I like having a detached house, (the last year I rented I had noisy neighbors on both sides), I have a steady job, I live 10 minutes from my brother and nephews (very important, that!).
Buying at the top of the bubble and watching the train wreck sucks, but I'm in pretty good shape.
I did a 110% cashout refi with a teaser rate in fall 2005 and I'm going to walk away when the rate resets.
The tax law won't cover deadbeats who just walk away.
Your fiancee will boot you when she discovers you're a stupid deadbeat.
Everything you do for the next 5 - 7 years will be screwed because of your FICO. Wait until you see your CC interest rates - or try to get a job or try to get an apartment - they check credit records for everything these days.
You are a loser. Slimeballs like you just gums up the works.
Bought my house 17 years ago, so it's all good. But thanks for asking.
Anon 2:43 AM
Thanks. Everyday realize how fortunate we are in our little cocoon. Get on a budget, and stop buying lots of crap.
Anon 3:32 AM
That is a question with an answer 15 years in the making, my friend. Here are the basics:
My wife's liitle brother was born when she was 12. And she was forced to be his co-mother. It took all the romance out of children, and smacked her across the face with reality. We also talked alot about children before we ever got engaged. Many people never discuss these things, they just do it the way society dictates. We just chose our own way. I got a vasectomy when I was thirty, and the rest is history (only cost $5 per nut, thanks HMO!!).
As far as the animals go, they are all rescued. One dog from a shelter was a puppy with kennel cough, and fleas that no one would adopt. The other dog was wandering around in a parking garage starving, flea bitten, covered in ticks. The oldest cat was found in a cage at PetSmart, and looked at me the right way. The other cat was found scratching around in the dirt while walking the dogs. 3 ounces, 5 days old and wounded by other animals.
I'm not sure if that makes them substitutes, or us suckers.
we are in a crisis - we took an arm out thinking "no biggie to re-fi to a 30 in 2 yrs" now house is worth just what we owe, went down aprox $10k in past yr. Now we can't afford our payment with the xtra $500 a month. So do we walk?? that's our dilema now, as all added up w/prop taxes and insurnace we are at about $2600 a mo. Is it worth it to hang on to a web blanket in the sea? i think not. its just a house damn it.
Inflation will get to you hiding in Europe too, when the great American stomach stops eating, and your prices either have to rise to offset decreased production, or you have to increase domestic consumption (and wages to pay for it) or both...ditto the Chinese...heck it already is hitting the Chinese. In the long run, American Tangible Commodities (ie, Real Estate) are good inflation hedges for the average joe (home debtors).
------------------------------------
The great american stomach... Love it!
It is going to be hard times for those countries that depend on exporting to America.
Canada - How are those exports to the USA doing now that the Loonie is par with the dollar(had been as low as 2:1)? Tourism in BC? Ready for those mortgages to reset (mortgages in Canada have a maximum of a 7 year term, there is no 30 year mortgage in the great white north).
I bought my house to live in, paid off the mortgage as fast as I could. and I for myself couldn't care less about house prices, although I worry about friends who have taken equity out to buy stuff,
Today I received an offer from my bank offering to lend me £5000 ($10000) over five years, I would only have to pay back £8250 ($16500).
Put it where the sun never shines
Built new house on 2 acres in rural Washington (St. Helens out my front window). Cost 235K, mtg is 200K. Recent neighborhood sales at 290K. So far our market is up slightly over the past year.
My mtg is a HELOC, called the Asset Manager. Has lower rates than conventional HELOCs (6.25, prime minus 1.25). My rate basically mirrors the rate actions of the FED. FED lowers, mtg gets cheaper.
I can take money out and put it back in at will. I don't buy crap or spend money on anything other than basic necessities, which comes from my income. The HELOC money is for investment only.
When an investment return will beat my APR, I pull money out and make money on the spread. When an investment will not beat the spread, I liquidate it and put it back in the HELOC to save the interest. Again, FED lowers, easier to beat my rate with an investment.
A while back I maxed out the HELOC and put the money in a mix of foreign currencies, gold, silver, etfs. I am just about finished liquidating my dollar assets (except the house).
I own a small business, work from home, and have a good income. As long as I can service the mtg payments and beat 6.25 on my money, I am doing good. I am searching for alternative sources of income because I think things are going to get real bad and my business will suffer.
No other debt, cars are paid for and will be driven until they die.
We will stay here until things cool down. Eventually we want a larger acreage so we can live off the land.
I would rather play in traffic then to have this conversation with a home debtor. It's safer. You think jet fuel instantly combusts?
We do not live in a Rand-ian theoretical fantasy world - and I say this as a former pot-smoking financial conservative - Rand was thought provoking...then I got a job, a mortgage, had to give up the weed and operate in the 'real world', which never quite matches the theoretical one...the differences are in small devilish details.
You dumbass. Maybe you should go back to smoking the weed all day.
According to your logic we should all just pack it in and go for a full blown socialist welfare state because it would be so much easier, it would eliminate social inequality and it's the only thing that can work in the "real world".
The reason we have all these problems and the majority of Americans have to work there asses off, live on credit and survive paycheck to paycheck - even with a high end job is because we're being taxed to max and income does not stay in line with the devaluation of the dollar.
Now that the credit bubble has burst people will see what their true standard of living has become. No housing bubbles or HELOCs to give you that false sense of feeling wealthy. No, the dollars we earn aren't worth shit because the Fed has been screwing us royally for a long time. Understating inflation and destroying America's economic competitiveness with high taxation.
Central planning always fails because it's inefficient - how many historical examples do you need?
Sure, a totally free market is not ideal as the eventual outcome usually leads to monopolies like we have today. That's why the goal should be to maintain a free market - a level playing field where monopolies are dismantled when they threaten market competition.
Government is the same way - the socialist system of government is one big inefficient monopoly that collapses under it's own weight. Ayn Rand's writing was not based on "theory" it was based on observation - her observations of the differences between the Soviet socialist system and what was closer to a free market system in the US.
I'd say she had a better grasp of reality than you and your pot-smoking mortgage debtors.
What's it like to know the 'value' of your home is dropping? And that your 'equity' is going away?
Hey Everyone,
I live in my own world and things really are different for my family... you see in my world the 'value' of my home has not changed at all.
Here in my world, I have a nice warm bed to sleep in and a roof over my head to keep the rain out. My house is full of fun toys so I'm rarely board. In my kitchen the fridge and cabinets are full of food. The car still has 'gas' in the tank (for now) and I get to do whatever I want each and every day. Life is good... no better its GREAT!
Ooh yea, I know that if I wanted to trade my land for some of those green pieces of paper... that well you know, given the fact that the financial system is in melt-down mode and the NINA mortgage scam has run its course... that well a fool (oops, I mean Buyer) can't con the credit markets out of more debt-credits as could have been done in 2005--- BUT WHO CARES?
Those green pieces of paper are loosing value so fast now that even big national holders like China are openly talking about dumping them for anyTHING of real value... so why on earth would I care how many green pieces of paper I could trade my land for; given that my land is owned outright together with its attachments such as: the house which is attached to and therefore is legally a part of the land.
DOUGLAS ADAMS, author of the Hitchhikers Guide to the Galaxy, hit the nail on the head with one of his fictitious characters who lived on the OUTSIDE of his inside-out designed home -- and refused to ever leave home to avoid going into the ASYLUM.
I bought a townhouse in Chicago for 799K. Yes, you read right, 799K in 2005. I can no longer afford it since I had run into some unexpected expenses (health problems and auto repair problems). But not to worry, I just walked away from the property because I put nothing down and the previous seller gave me 5% for the downpayment.
Whatever the ugliness on the books of the GSEs, I suspect we will find that their accounting and business practices are significantly better than what has been parading around in the self-policed "free market" provided by unregulated and unfettered capitalism (aka REIC). Ron Paul Libertarianism is an explicit call for the total liberation of the REICs from any sort of restraint. They may be hurt in a crash, just like a bunch of drunk frat partiers get hurt doing stupid stunts which result in burning down the frat house.
The real estate bubble, stock market bubble, etc... stemmed from EASY CREDIT. Alan Greenspan and Company cranked up the printing presses. Flooded the country with cash and credit. A phony boom commenced. The Real-Estate Industrial Complex (REIC) prospered feeding on the phony boom brought about through inflated currency.
IF Ron Paul became president AND did not get shot 20 minutes later, one of his top goals would be eliminating the Federal Reserve. Then switch the U.S. to a Constitutionally-legal currency (i.e., backed by gold and silver).
In other words, no more inflation. No more easy credit goosing up the stock market and housing market.
The market would be SELF-REGULATING at that point simply because there would be no more easy money sloshing around.
I am a big fan of this site, but I don't care if my house value falls, and rises, and falls again over the next 30 years. Got everything I want in it and plenty of savings in other investments (problem is much of my money invested is in US dollars - working on that)
a few grammar points. 1 - Than is a comparison, then is a conditional (ie. if/then). 2 - It's means: it is, and Its describes characteristics possesed by said item. To, Two, Too....please people - the internet is supposed to make you smarter....
We bought in 1996 for 88K. Most recent tax assessment claims it's worth 160K, I would believe 145K.
We have a first mortgage at 5% fixed for about 100K, second at 8% for about 35K. We used the second mortgage to buy silver bullion. I thought we would be rich by now with the bullion. We're not rich yet, but it has been a pretty good investment, and I do hope it will explode soon.
So, yes we used the house as an ATM a couple of times, but we're not sorry about it. If you stay in control, and get fixed mortgages, it will usually work out OK.
BTW, the combined mortgages (with taxes and insurance) are about $1020, while the equivalent rent would be about $1100. I ran some numbers to see if would be worth selling, but it didn't make sense with an expected price drop of $15K. Obviously results vary in bubbleland.
I bought a townhouse in Chicago for 799K. Yes, you read right, 799K in 2005. I can no longer afford it since I had run into some unexpected expenses (health problems and auto repair problems). But not to worry, I just walked away from the property because I put nothing down and the previous seller gave me 5% for the downpayment.
Dear Blogger,
I'f I were in your shoes, I would be scared sh!tless. The mortgage servicer has your personal information including your SSN#, and the law says that they have to issue you a 1099-C within 3 years of writing off the loss your property generated.
The overall property market continues to fall. The property that you walked away from might sit for a few years vacant until it finally gets auctioned off. Due to market conditional and poor condition of several year old vacant home; this property may generate a 40% to 70% loss on your apx $800K mortgage.
A few years from now after you have long forgotten about this townhome; you are going to get that 1099-C debt cancellation income report. THE TAX CODE MAY TREAT THE ENTIRE AMOUNT AS TAXABLE INCOME IN THE YEAR THE 1099-C IS ISSUED.
THE IRS will come after you for wage-guarnishments (that you can't file BK on) to collect this tax debt.
So how BIG a tax debt are we talking here? Let's go with a middle of the road estimate of 60% loss on $800K for the creditor.
You would receive a 1099-C showing taxable income in the amount of $480,000 for the year the 1099-C was issued. This will put you over the 30% federal tax bracket, leaving you will a minimum liability of $144,000.
Now, since you don't have $144K to pay the IRS off, they will charge interest on top of your debt; then collect it out of your ass with a FEDERAL WAGE-GUARNISHMENT.
Worst yet the State and Local Gov't may come after you to boot!!!
AND LASTLY, If you aren't depressed enough yet... Your credit score will drop to the bottom of the bucket BECAUSE that's what FEDERAL WAGE-GUARISHMENTS due to your credit rating. And as your credit score drops... your insurance rates go up for everything (auto, heath, etc.) HECK, many employers won't tell you this... BUT you can lose a good job because your credit score sucks and is causing the companies overall health care ins rates to increase!!!
Enjoy the rest of you life paying a max wage-guarnishment to the FED as your forced payments may not even cover the interest and penalties due on your tax-burden.
THE PATH YOU HAVE UNWISELY CHOSEN:
*** SURFDOM USA ***
1. No
2. Yes, I did twice, but I never touched all my equity. Also sold my house for 4x what I paid and used the proceeds to pay cash for my new one.
3. No
4. NA, I owe nothing!
5. Early 2006
6. Where I am now my house has appreciated slightly. The house I sold in northern CA has gone down aproximately 12% in value
7. Both my houses were homes. I kept the first one for ten years and will probably be in this one till the end.
Anonymous1:
According to your logic we should all just pack it in and go for a full blown socialist welfare state because it would be so much easier, it would eliminate social inequality and it's the only thing that can work in the "real world".
I said NONE of these things...you shove words into my mouth and then immediately proceed to hammer the straw man with your arguments.
Anonymous2:
There is no question that the Fed created much of this bubble by keeping rates too low for too long. Greenspan was too willing to print to sustain the bubbles one place or another. But, the M3 rates went away because it wasn't just Greenspan & the Fed - it was Wall St. with CDOs who were creating paper money - an awful lot of this only exists in promises to pay - not real cash - it's paper profits turned back into paper loans, etc. As the bubble deflates, much of this 'equity' will simply evaporate. Sure, some of the Ponzi bandits will make a safe getaway with some of the loot, but most of it will simply evaporate.
You have a very short understanding of history - we already had the "Cross of Gold" campaign - see William Jennings Bryan and the Wizard of OZ...much of that inspired by the crisis of 1895. You cannot have a growing economy where the rate of expansion of the economy is limited by a fixed money supply. Otherwise, things just keep getting more and more expensive as money gets scarce. You have to grow the money supply at the same rate as the size of the economy increases - there is not a zero sum game (there might be if we kept population and productivity stable, but we don't and can't).
The Federal Reserve - the need for a central bank to control that money supply - rather than, say, mining companies who mine gold and silver (effectively "money" in a metal backed standard). JP Morgan was able, by virtue of near monopoly control of banking, to provide this national service during the Crisis of 1907, but the fact that a private sector central bank did this rather than a quasi governmental central bank, in no way obviates the need for such an entity.
We really did live through the brutal consequences of what you propose - and we have the structures we do precisely because we found out we need 'em. Yes, Central Bankers can rob us of our savings with the hidden tax of inflation - Greenspan and Bernanke are taxing us to pay for Government debt (Iraq) as surely as George Bush claims not to be. But, we have to have their ability to cushion the shocks - the brutal reprecussions of economic shocks - to lessen the net damage.
I would add only: if Ron Paul were elected, the Secret Service would protect him from getting shot; his worries are more when he starts looking like he might really get the nomination - before the SS detail is beefed up sufficiently to protect him from the Corporatist Welfare Whores who are the Business Wing (GWB's and now Giuliani's backers) of the GOP.
The 'homedebtors' are all Gen Xers sucked into the market during the bubble years.
And you panic-sters don't know it.
lol
Good idea to cheer on the demise of your really stupid generation.
The 'homedebtors' are all Gen Xers sucked into the market during the bubble years.
And you panic-sters don't know it.
lol
Good idea to cheer on the demise of your really stupid generation.
Bought this house in 2001. Paid 20% down using proceeds from the sale of my previous house.
In 2003 refinanced to a 15 yr fixed rate at 4% (had to pay a couple of points for the rate). Payment went up about $150/mo when I did that, but the new mortgage will save me about $150K. The new mortgage was merely to pay off the previous one, no cash out re-fi(the lending agent was shocked).
Not sure what the "opportunity cost" of that $150/mo is, but there are a lot of specuvestors out there right now having their "opportunity cost" sold on the courthouse steps.
I don't care that my home is dropping in value dramatically - between buying the house cheap, paying 20% down, and paying off principal with a short-term loan, it would take a 75% drop from peak to put me underwater at this point.
It's just a house. I have a fully funded 401(k) for retirement, LOL.
However I won't be spending any of that 401(k) money on monthly shelter costs cuz my home will be paid for - which is why you should own your house outright when you retire. Ask anyone who rented during the 1970's what happened to their rents when inflation started pinching their landlord.
And because I have quite a bit of cash left over after funding my mortgage, 401(k) and kid's school, I screw around on Ebay and buy cool stuff for my knick-knack shelves :)
In a happier world I would rent a 1bedroom apartment on the shitty side of town with loud neighbors and gunshots in the night.
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