In Fort Meyers Florida, a home that sold for $500,000 in 2006 may now be worth only $205,000. The % of decline from the peak in Ft Meyers is 59%. Listen carefully to this very sobering fact, it would take appreciation of 144% for the homeowner to get back to the purchase value of $500,000.
To get to 144% appreciation at an average annual rate of 5% it would take over 18 years to recover the equity. OVER 18 YEARS!
In Akron OH, a home that sold for $250,000 in 2006 may now be worth only $130,000. The % of decline from the peak in Akron is 48%. it would take appreciation of over 92% for the homeowner to get back to the purchase value of $250,000.
To get to 92% appreciation at an average annual rate of 5% it would take over 11 years to recover the equity. OVER 13 YEARS!
In Riverside California a home that sold for $500,000 in 2006 may now be worth only $300,000. The % of decline from the peak in Riverside is 40%. it would take appreciation of around 66% for the homeowner to get back to the purchase value of $500,000.
To get to 66% appreciation at a historical average annual rate of 5% it would take around 10 years to recover the equity. OVER 10 YEARS!
This is a very scary fact that I haven’t heard much talk about. The simple fact that appreciation has to almost be double in some cases than the depreciation is VERY chilling. Recovery as defined in the dictionary is: “a regaining of something lost or stolen”. Equity has been lost. To recover that lost equity it may take more than 10 years in many hard hit areas of America. A decade is a long time to be underwater. Throughout the last decade, people got used to refinancing every few years. They would pull out equity and pay off credit cards or use the cash to do home improvements. Equity is gone and so are the days of 20-30% annual appreciation. It’s like shoots and ladders. Going down is quick and sudden. Climbing back up, takes time and effort. Money is easy spent yet hard to save.
The surplus of homes for sale is now over 2.0 million, mostly existing homes, and will still be over 1.0 million by the end of 2010 even if housing start increases are slim and household formation returns to non-recessionary trends. The surplus a year and half ahead will be partly due to the excess building in 2003-07, partly due to the still depressed, although recovering economy, and partly due to lower housing demand from reduced net immigration, real estate speculation and willingness to buy second homes.
Combined with the new wave of foreclosures that are being initiated, I predict housing will not be stable or see decent appreciation for several years. See inventory chart below as published by the Wall Street Journal on May 21, 2009.
![[real estate inventory banks]](http://s.wsj.net/public/resources/images/MI-AW811A_INVES_NS_20090519185326.gif)
Investors and speculators buying properties does NOT deplete the supply as reported by the Wall Street Journal on May 21, 2009
Though not every cash sale involves an investor, the investors often use cash because they can close quicker and get a better return. In the Phoenix area, for example, about 38% of April sales of single-family homes were all-cash deals. In Punta Gorda, Fla., the figure was 67%, and in the Las Vegas area, total cash sales were 39%.
Barclays Capital estimates that banks and loan investors owned 765,500 foreclosed homes as of April 1, up from 629,100 a year earlier. The inventory is expected peak at about 1.3 million homes in mid- to late 2010, according to Barclays.
The investors are no panacea to the nation’s housing woes. When the market improves, many of them could put their houses up for sale, reinflating supply.
“All this investor buying isn’t depleting supply, it’s only shifting it around,” says Mr. Allen of Gorilla Capital.
On Friday January 30, 2009 Robert Shiller said:
“It is quite possible that house prices fall more strongly than they did during the global economic crisis of 80 years ago. The real estate crisis could last 10 more years.”
My Thoughts
A decade is a long time to be under water.
Does it make financial sense to walk away and rent?
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My friend had to make a life decision for his family. He was in MN and his property had dropped about 40% in value, his income was significantly decreased. He got a job offer in a nice area in FL for more money and a better life for his family. He struggled morally with the decision at first, but now every time i talk to him it was the best family as well as business decision that he could have made. To him it was a “no brainer” and with the struggling economy in MN he may of had to foreclose anyway, even if he had not made the move. He is much happier to have this burden off of his shoulders and not have to worry about it for the next 10 years. He will get through this like the millions of others, but from a financial standpoint it did not make sense to continue dumping money into a severely depreciated asset, especially if it was only delaying the inevitable.
While some might call you a doomsday “the sky is falling” type I would actually think if anything, you’re being overly optimistic. Your estimations are taking into account not only a steady 6%-7% price appreciation over the next 20 years (An ROI most investors and fund managers would brag about!), but you are also estimating these numbers as if the bottom of the housing market is right here right now, which I think is also quite optimistic.
I would think that while the real estate valuations are gonna fluctuate and be incredible volatile, where we’ll probably see a 10% price jump one year but a 5% loss the next. But just for arguments sake, let’s play out another feasible situation… one where real estate prices fall another 10% over the next 2 years, and then appreciate at an average rate of 4% from then on…
In this scenario, the $500,000 Ft. Meyers home is now worth $184,500, a decrease of just over 63% from the peak. From there, you need an increase of 171% just to recover all your lost equity. At a 4% steady increase in home values, you’re now looking at about 43 years to get back to even… WOW!
Assuming you started year 1 of 43 in 2011, that means you become whole again in 2054. When thought about in that regard, suddenly a few years of crappy credit seems much more manageable.
I never thought about recovery in that way, even with 10 percentage appreciation the numbers are scary. Personally I just started looking into purchasing a home in the San Diego area. After reading this I still think I will continue my search as I believe the right deal is good even if the market goes down a bit further.
However, If I was in one of these upside down homes it would be difficult for me to continue making payments knowing that I won’t be able to get out of my home with out a hit to my credit with in the next ten years.
Unless I win the lottery or a rich unknown relative dies and leaves me some cash.
Blake
Once I came to the obvious yet blinding decision to foreclose it was like dropping a 100 pound bag of bricks, I could finally start looking forward and leave this ulster ridding ball of stress behind. The future as well as my life seem so bright again at last. I was in the position of having to sell things on eBay just to eat and get by after paying my mortgage. The decision finally hit home when my dog had gotten out and my neighbor tried to ring the door bell but since my power had been cut off it was to no avail. This was very embarrassing and that was when I decided to throw in the towel. Having a home is a wonderful thing but it is an investment at the same time and when I finally figured out that I was not going to even start to see a return on my investment for at least another ten years it was a no brainer. After researching I found that there are over 4.5 million people in my same situation thus it is comforting to know that I am not alone.
An addendum to my prior comment I just realized…
Neither one of us was even taking inflation into account here. According to inflationdata.com, since 1914 the average annual rate of inflation has been 3.4%. Take into account that we are printing an ungodly amount of money that is being pumped into the system, which should swell this number well above average over the next 10-20 years.
So at an average inflation rate of 4% per year, even in 2054 when your $500,000 equity has been recouped, it is now worth about 172% less than what it was at the bottom of the housing market. Yikes!
It seems that all there is is a lot of speculation about what will happen with the housing market in the near ( and not so near) future, but let’s face it: it’s all just speculative. Nobody thought the bubble would inflate as much as it did, and no one certainly wanted to believe that the bubble will burst as gloriously as it has, with housing values sinking faster then Leonardo DeCaprio in the Titanic.
So, if you were faced with a “situation” like one of those mentioned above, if you could have seen this coming, would you have gotten out 2 years ago? Most of us would have, I’m sure. I was blindsided 2 years ago by the 90K drop in the value of my condo, and let the condo foreclose, and I’m glad I did. I know now that if I tried to hang on to it, I would have probably been bankrupt by now.
My old place is over $180,000 upside down right now, and even at an aggressive rate of 5% increase , it would take my modest 2 br. condo well over 15? 20? years to just break even. Consider that.
I cant understand why anyone in their right mind would stay in a situation like that, paying on a home thats worth half of what you owe!
It’s refreshing to hear the truth from SOMEBODY. I’m soo tired of all these people and websites that keep pushing people to do whatever it takes to stay in their home, to scrimp, to save, to cut back, to accept a loan modification which does not reduce principal and adjusts higher ( much like option arms ) after the first five years.
It’s such crap. The banks orchestrated this fiasco with their unending greed, let them deal with the fallout.
Personally, home is down over 50% right now, my income is reduced thanks to the resulting ailing economy, and since I don’t have an ocean view, staying would just be idiotic.
I’m amazed how much positive spin there is in the mainstream media about the housing situation though. They keep suggesting that things have “stabilized”. What a load. Time will show all liars for what they are…
I am a mortgage loan officer. Over the last 24 months, I have seen a massive restructuring of the mortgage loan guidelines that determines if an individual or couple can qualify for a new home purchase. In retrospect, had these guidelines been in practice over the last 8 years many of the homeowners that are in trouble today would not have qualified for a home in the first place. While this would have eliminated the housing bubble that has since burst, we must also recognize that it is this same housing bubble that fueled our nation’s economic growth. In other words, take away the housing bubble and you remove millions of jobs that were generated through it. Likewise, take away the housing bubble and you remove billions of dollars of consumer spending that came as a result of equity refinances promoted by massive home value appreciation.
So where does that leave us? Well, hindsight being 20/20 we have a chance to get back to old fashion lending principles where a home owner actually has to have a job to qualify for a loan. Due to the tremendous excess supple of homes that will become available over the next 3 to 4 years, we can not expect substantial home appreciation. Therefore, consumers wishing to make purchases will have to actually earn the required income to do so and not be dependant on their bank of equity (home) to pay for their toys. Sure, luxuries like jet skies, power boats and motorcycles will take a hit, but on the flip side, the concept of delayed gratification or building a savings account my actually become the fashion.
While it is hard to imagine where the future leads, it is possible to believe that, just maybe, we can come through this in the future, as a more fiscally responsible society that actually plans for the future and saves for luxuries.
It’s just so sad reading these comments. There are so many losers dumping their properties, causing so much stress on all other people who spent within their means. “It’s just a financial decision.” No, it is not. Not when you and your attitudes are screwing the country. Not when your irresponsibility has played a role in the recession that will necessitate higher taxes on more responsible citizens. Not when you are depressing your neighbour’s property value (who spent wisely and is not foreclosing). But I guess that self-centered perspective is what got us into this situation in the first place.
Darkhound,
Everyone is entitled to their opinion. You can be mad at people for eating at McDonalds because it makes people unhealthy and ultimately raises our heath insurance rates, or you can realize that it’s a much bigger problem than that. The neighbors either A. made a bad decision in buying a property at the peak of the market or B. They purchased their property before the peak and they enjoyed the appreciation like everyone else. It has nothing to do with someone deciding to walk away from a bad investment. That is not the cause of property declines. Values are going down because real estate was WAY overpriced and the supply and demand is out of whack. These attitudes aren’t “screwing” the country. The country was screwed by the greedy people who allowed this to happen to our country, while they made Billions of dollars.
Your number crunching is incredibly optimistic. Prices will fall for at least another 2 years. After that, prices will be static for approximately 5 years as we clear through inventory and all the timebomb recasting ARM mortgages. In the last big housing bubble (California’s late 80s-early 90s) prices bottomed out and then took 5 years to begin appreciating. And this bubble is so much bigger.
Finally, a 6-7% annual return is not realistic. Adjusted for inflation, a house bought in 1890 was worth the same amount in 1990. You read that right. In the long run all housing does is keep up with inflation. So 3-4% annual appreciation is the real number, as that’s the long-term trend.
Think about how fast you can SELL something before you Buy…Stocks, Bonds, Commodities, and other Financials can be dumped in a ‘New York Minute’ but Real Estate is a totally different story…Especially if your purchase is a home to live in with family…I had a college professor of marketing tell me once that the two biggest purchases that people make in their lifetimes are homes and cars which are based on EMOTION…EMOTION……..So after you buy the home and things change in your life and you want to Sell, you will not get out in a ‘New York Minute’ my friends…You are in captivity…I’ve been there…Jim
THANK YOU!…I have been saying the same thing all along in regards to sitting in a home that may NEVER in your lifetime come back to what you paid for it. I agree that people who are now buying homes are buying them because they can AFFORD them.
However, I told many back in 07 that this was going to get much worse if the banks did not make a effort to stablize the problem. I don’t agree with giving everyone a free pass, but if you are in a home, with a 30 year mortgage and you are in finanicial stress at this point in time, the banks should try to work with you. There are many people out there who made a COMMITMENT to live in that home for the duration of the mortgage. Who can say what can happen over 30 years? But in this type of market, to tell the person to JUST SELL is near impossible! Buyers are limited and are not just JUMPING into the market, foreclosures are abound, and people are nervous about their jobs. Will millions of EMPTY homes sitting idle and more to come, the banks need to step up to the plate and offer assistance to stabilize not only the housing market, but as other have pointed on, our economy.
I believe the housing downturn will last at least another 5-10 years, depending on where you live and that the economy will not stabilize until then. The effect on housing was like the pebble in the water. The problem is the ripples are still going on, and on, and on.
And THANK YOU EX PRES BUSH..for doing to the banks what they did to many people…you just gave them money without any qualifications, proof of income, documentation or finanacial stability..I guess they got the last of the “LIAR LOANS.”
There is no such thing as “owning” we are ALL RENTERS period. Let me see how long we would be able to stay in our homes if we did not pay our property tax but our mortgage has been so called paid off… NOT LONG!!! We are all slaves to the bankers who created our mortgages or loans out of thin air they have NOTHING to loan us! Do some research on the FEDERAL RESERVE SCAM and if you are not pissed off you are not paying attention! Anyway if you are upside down on your scam loan WALK! It’s much better than being a slave to this crooked system we live in!!! ABOLISH THE FEDERAL RESERVE!!!!!!!!
Most real estate cycles in California take 8-12 to get from top to bottom or bottom to top.
This WIERD WILD FINANCIAL BUBBLE will take about 12 years. 12 years at least. Assumption: 2006 was the top, then the bottom may be 2014 to 2018 based on 8-12 years. That’s the estimated bottom, normally.
But, I think the real bottom, to absorbe and sell the bad inventory of Repos, will take us to 2015-2016 and add 2 to 5 years to MENTALLY recover, or 2018 to 2021. OUCH….
My experience since 1974= 3 full cycles, 3 up & 3 down, and 600 sides in real estate, aka buy or sell. Last 198 sales = avg. gross 1165% and avg. hold 2 years each.
@DH: “Not when you are depressing your neighbour’s property value (who spent wisely and is not foreclosing).”
however, it’s these same ‘losers’ and their uncontrolled spending on housing that drove house prices up in the first place. if everyone had spent wisely housing would not have increased as much as it did. so, it’s not that they are depressing prices, it is that prices are just reverting back to the mean long-term price for housing.
It is quite likely that you will pay off your 30 year mortgage before your house reaches peak value again.
I think even a 4% growth assumption may be optimistic, due to the incredible oversupply of houses built, combined with demographic realities of retiring/dying Boomers.
We are in a situation of long term falling demand, staring into the face of massive over-supply.
Not to mention the massive wave of foreclosures still to come, because of bad loans and so many people being underwater.
Family homes for 50K will probably be the norm five years from now.
I’d be surprised if you print this because it doesn’t follow along with your own thoughts. I’m a renter. Renting sucks. I’m tired of nervously anticipating the unexpected visits of my landlord, or seeing them drive by slowly out my window. They have mentioned they might try selling it. That means packing up and looking for another overpriced dump to live in. There is something to be said about having a “home to call your own” and do with what you please. Perhaps more money can be had being a life-long renter, but certainly I look forward to having my own place someday.
This is to be expected. I read about some personal experience with the 1989 property bubble in Southern California. It took 12 years (2001) for one couple to finally break even on their condo (not including interest, fees, commission). I think they sold at that point (only to miss this credit bubble). People who lived through that swear off owning RE ever again.
Even appreciation of 6-7% is way too high to be realistic. To support that, you need wage inflation of the same magnitude and/or mortgage rates to drop.
We are not even at the bottom until 2012, and recovery is going to be long and slow. I say they’re lucky if it’s just double years of all your estimates.
(A later version of this chart shows a “peak” value reached at 205 before starting what will be the very long and painful slide downward)
Correctly, houses can over the very long-term only go up at, or almost imperceptibly above, the underlying rate of inflation. (Otherwise we would all be paying $2M for a 6′ X 8′ outhouse by now). When you take out a fixed 30 year mortgage, you get to “pay it back” (especially in later years) using far less valuable “inflation bucks;” which generally make it much easier to afford. My Dad thought paying $151.67/month for a 20 year mortgage on a newly built 5 bedroom/3 bath 2400 ft2 home on 3.5 acres in 1959 located two miles west of a little “unknown country crossroads in Northern, Virginia (Tyson’s Corner – when he had previously been paying $100/month) was something to think “nine-ways-from-sunday” about before signing on the dotted line. (Home owners heebee-jeebees). By 1979, the utility bills ran more than that each month. Moderate inflation was a “gift” as long as your salary and subsequent retirement pay kept pace over the years (which his essentially did). Only when you’re on a “fixed income” does inflation begin to take its toll. One of the most recent homes built there in 2008 has an asking price of $4M. Homes like those of my parents and friends parents in that neighborhood are now almost always torn down to make way for new 10-15,000 ft2 McMansions……..
A History of Home Values (graph 1890 to 2006)
http://www.investingintelligently.com/wp-content/uploads/2006/08/a_history_of_home_values.png
The Yale economist Robert J. Shiller created an index of American housing prices going back to 1890. It is based on sales prices of standard existing houses, not new construction, to track the value of housing as an investment over time. It presents housing values in consistent terms over 116 years, factoring out the effects of inflation.
The 1890 benchmark is 100 on the chart. If a standard house sold in 1890 for $100,000 (inflation-adjusted to today’s dollars), an equivalent standard house would have sold for $66,000 in 1920 (66 on the index scale) and $199,000 in 2006 (199 on the index scale, or 99 percent higher than 1890).
Double check your numbers. For $205,000 to appreciate to over $500,000 it only takes 16 years at 6%. At 7% it takes 14 years. This is using PV*(1+%)^Years. Granted, this doesn’t factor in maintenance or inflation which will push your appreciation down a few % per year (which will surely push the time line over 20 years).
No one is talking about the ELEPHANT in the room… HYPERINFLATION…
I agree buying now isn’t a best idea… But in a year or 2… it may be a huge hedge against Hyperinflation.. … Say you buy it in 2 years… for $400K… we go into hyperinflation.. that $400K house will appear MUCH cheaper with your higher income and hyperinflated dollar…you’ll have a huge asset paid off in half the time…
There will be no “hyperinflation”. Wages and salaries would have to hyperinflate also. Grocery clerks would have to be making $100,000/year to stay in their house or apartment.
Obviously you can not hyperinflate houses without the people having hyperinflated wages to pay for them. If not, no one could afford the inflated houses….oops…market collapses again.
You said that “To get to 144% appreciation at an average rate of 6-7% it would take over 20 years to recover the equity. OVER 20 YEARS! ”
But your calculation is somehow not correct. We need to use the compound rate for calculation. It would take a bit more than 13 years to get to 144% appreciation. The formula is 1.07 multiplies itself thirteen times.
Good point. I will re-work the numbers. Thank you.
I can give you a concrete example of how long it might take. I bought a 2 bedroom Condominium for $13,000 at auction 1989 during a real estate bubble bursting in NH. At the top of the market in 1987 similar units sold for $140,000. Today 20 years later the Unit is worth a little under $100,000. With the current recession it will probably be another 20 years before it is again worth $140,000. These are not inflation adjusted numbers.
My conclusion is that if I was 50% under water I would probably walk.
I place the blame for this mess first on George Bush for changing the law put in place after the great depression prohibiting banks from creating leverage greater than 7 to 1. If this law had been kept in place the bubble would have run its course long ago and would not be nearly as severe. The banks are the second to blame, they are supposedly trained as bankers, where is the collateral and where is the cash flow to pay the loans. Their head got stuck in the clouds over the ridiculous and outrageous salaries and bonuses that they are paid.
Regarding the great looming threat of “INFLATION” and buying real estate as a hedge against it.
As Jon King points out above, the runaway inflation that is inevitably coming down the pike due to the incredibly irresponsible spending of the government (and I’m a Democrat) will have NO effect on housing. Why? Because the inflation will reduce purchasing power, but it will not increase wages. And housing prices are directly tied to incomes.
What we will see is STAGFLATION. That means rising inflation + rising unemployment. Economists fear it more than anything because there is no obvious fix. Rising unemployment (i.e., falling wages) will lower home prices even more.
Housing is not soley tied to wages; its is tied to credit. the money thrown at this problem through the stimulus packages could be enough to offset the deflationary effects from housing and the stock market and eventually cause inflation. Check out shadowstats.com. The CPI was probably closer to double digits before this deleveraging took effect.
You walk away from a loan and leave the mess for others to clean up for generations? You’re a murderer.
The costs to others will include reductions in Social Security, Medicare, health-care costs, etc. Some people will die as a result.
But you’re just being pragmatic and looking out for your family, right? Killers always have justifications. They’re still killers.
I hope I can pay off my house within the next ten years
“You’re a murderer.”??? Wow that’s strong. Why is a homeowner (1 simple homeowner) to blame for this whole mess? Think about the root of the problem, not the symptoms. If we are going to ever cure this problem, we need to get to the cause and the true disease… not the symptom. Remember also (while you are being judgmental) that you may have left a mess at some point in your life for others to clean up. Don’t feel sorry for the Lenders / Banks & Wall Street. They are the ones who allowed this to happen.
Hi, nice posts there
thank’s for the compelling word
I see a few people blaming Bush, while I think the guy is an idiot you are ill informed. Clinton started pushing Freddie and Fannie to take on increased risk to “make housing affordable for everyone” back in 1999 and if you do a little research you will find articles dating back to 99 and quite a few from the present. Bush merely continued the trend, I don’t have much faith in Obama either….this problem is way to deep and will last for generations. I hear the word Trillion thrown around and little reaction to how much it is…..If you had 1000 USD bills stacked flat and tight 1 trillion would stack almost 70 miles high! Oh, but I’m from the government and here to help……..Yikes!
As a follow up, here is one part of a 3 page article from 1999:
” The two companies are now required to devote 42% of their portfolios to loans for low- and moderate-income borrowers; HUD, which has the authority to set the targets, is poised to propose an increase this summer. Although Fannie Mae actually has exceeded its target since 1994, it is resisting any hike. It argues that a higher target would only produce more loan defaults by pressuring banks to accept unsafe borrowers. ”
http://articles.latimes.com/1999/may/31/news/mn-42807?pg=2
Walk away. The tax payer including you and your children will pay for you dumbass mistake; but what are you going to do? Keep paying the mortgage on a house upside down by $200k? Just keep in mind that you are a retard when it comes to finances and investing and don’t buy another house for 7 years.
Stay out of the market and let those who are sensible steer the market back to affordability. The last thing we need is for you dopes to get out there in 3 years and start bidding up houses to ridiculous levels again. Houses should be affordable. Really, really affordable. That way it really is the American dream and not a life-long debt sentence.
Bankers create money for loans out of thin air; you allowed them to create a nation of debt serfs. Now they got your money AND your house. With cheap housing the greedy bankers don’t get to leech off productive society and Americans will have spending money to refuel the economy.
Nice posts for a boring day. I will putting money in my bank account(FDIC bank). Now I have enoug to buy to houses and growing.
I am so glad to see like minded people, I am talking with some ex co workers of mine, and he is not willing to see how much he has yet to lose. I agree with most of you all, just to be clear the EXAMPLE of 6% is a SUPER ROSY and not at likely, If we go back to trend we will be doing good, as overshooting on the low price side is real possibility as well, I think we fall in housing prices for the next 5 years, granted not at the high rate of lately, but when add in to the mix of likelihood of higher interest rates, lower income (less jobs=lower income) and if the economy does gets some feet under it, then OIL will hold us back as it will surely go very fast over the 100- and maybe even the 200 it is a GIANT unknown to be sure, and as a market in History this is the DAY BEFORE GM is likely going to Go in the Bankruptcy, GM People that ought to make us Shutter as it was often said WHAT IS GOOD FOR GM is GOOD USA and vise verse people, this is a (this credit crisis) GAME CHANGER and not just another recession. our way of life has been changed, Not ruined, not worse per say, Different and in fact BETTER in many ways, DEBT is NOT a good thing, so I hope everyone barrows less (I personally owe no one any thing and I plan on keeping it that way) I will never barrow money again SAVE SAVE SAVE and thrifty (not stingy) thrifty! Healthy and NICE to everyone, please folks I hope you agree, be nice to a stranger, they need it… Help the down and out even if you are a little tight, we all have a few dollars to help a fellow HUMAN out don’t we? OK O I am off the soap box… Thank you all for informed posts, your well thought out responses. I am going to go on record as follows, 2014 prices stop going down in most places, 2009 -25% 2010 -15% 2011 -8% 2012 -1-3% 2013 near zero less then -1% then (these are for Brentwood No. Ca) depending on interest rates, I would say they will be about 9%-12% by then and USA Avg home price will be 130,000 and out here in Brentwood Cal. Avg. price will be 200,000 and highest end will be 289,000 – 349,000 those homes are now 525,000 with high water mark of 1.2 million in 08/06 lol never to be seen again ever!
To Joan J who posted “Just keep in mind that you are a retard when it comes to finances and investing and don’t buy another house for 7 years. ”
I am a responsible person and didnt buy more than my family could afford. I even got a 30yr fixed at 5.5%. Our plan from 04 when i bought my 400K San Diego condo was to keep it as an investment and after 5-7 years or using it as our primary residence, use the equity to buy a a house. But here i am at the 5 year mark and short sales in my complex are selling for $280K and there is no way any bank is ever going to give me another loan to buy a second home. I guess plans are just that and they can change but the thought of waiting another 7+ years just to break even is really screwing with me. I feel like since i’m already about 30% underwater that short selling is probably in my future. Why shouldnt I? when all i have to do is rent for 2 years and then get to buy an even better place for less money. Thats not being a retard.
I don’t believe we were retards.
I bought 2 yrs ago, right before the market fell out. I have a 30yr fixed principal and interest loan. I paid 16k to buy my points to get my interest rate down to 4.785%. I did everything right, except I bought a SUPER inflated house! I bought for 480k and my payments are $3,000/mo. The house behind me and the house next door, both just sold for 300k last month. That’s a 180k loss in 2yrs with no clear end in sight as to when the market will stop dropping. I’m also considering a short sale or foreclosure. The only problem I’m having is knowing I can’t buy again for atleast 5 yrs and then I’d waste 100k in rent. It’s a really hard decision. I just keep thinking that when I want sell in the future, I have to sell my house for 6% more than what I bought it for to break even. (I’ll have to pay my realestate person).
That means I’m really about 208k down to break even in my house.
In 5 years, if I stay, I will have some equity, because of my monthly payments.
I know most of you are saying it’s a no brainer, but if I want to buy again I’ll have to save 20% (let’s say 60-70k), another 10k in closing cost, $ to buy my points again (optional) and pay 100k in rent over the next 5yrs.
Do you still think it’s a no brainer and would you dump the house?
To: Sara
Please consider what I did, Sara. I am 49 and I have no kids nor plan to, as that might or might not change peoples plans. I have bought and been foreclosed on, and depending on what part of the USA you live will also make a BIG Difference. I personally plan ON NEVER EVER buying or owning a home again (I am in Ca.) as I don’t see a reason, or benefit. I would (must to make it true) rather invest in mutual funds or bonds or ? your choice, and RENT and experience a few different places, age plays a role also, BUT even if I was 30 I don’t think in the coming 30 years USA is going to see an upswing like we used to, Now if you move to a Growing country (one of the BRICKS) that would change, but in the USA I don’t see it as wasting money on rent. That is my two cents Hope you make a good decision and DON’T make it from a Finical point of view if you would rather. I don’t see the downside to renting in USA from NOW ON, as that massive over upside is not going to return as it was driven by lending, that is not ever going to happen like that in our life time, and I hope never again as it should not have happened this time. It is not a DREAM to OWN a home, it is a DREAM to OWN your time!
Walking away is a tough descision for me, but killing myself at work is not the answer. My health is down, weight is up, sleep (what sleep), loss of life time.
I thought I could sell my way out of this financial burdeon, but it is taking a toll on me.
Renting? Foreclosure? I hope this can buy my family a life again.
We bought a house right at the top of the bubble. We fell into the trap. I used to hear co-workers laugh at me because I was making $140K a year and still renting. I told them that I felt the bubble was going to burst and wanted to wait. Guess what, I listened to the sheep, not my gut instinct.
Should my family be stuck in a situation of giving up their lives to pay for a home? I work in sales (in the construction industry for insurance) and my income has went down like the market. But, our company wants us to sell just as much as when the economy was good. This means, work through your lunch, come earlier, stay later, work on weekends, no time off if you have not made your (impossible) quotas.
For what? A home? Yes, I like having our home. But, at what cost.
What is the right answer? Live or ball and chain.
I rent. Renting is not a “waste” of money. It’s an exchange of money for shelter. I give my landlord money, and he gives me my great apartment. The real waste is the additional money I would spend for a comparable house in interest, insurance, property taxes and repairs.