Their dream home quickly became a nightmare. They found themselves significantly upside down on their home. In Loudoun county prices have fallen farther then other DC area locations as it is a far outer suburb. These far outer suburbs (exurban) locations are will continue to be hit particular hard by the declining housing market. Just watch Queen Creek, Arizona.Jeffrey Taylor and his wife bought their dream home in Purcellville for $538,000 last August. Now they have to sell it because they are getting divorced and neither one can afford the mortgage alone.
The most they could get for it was $430,000. After paying all the real estate commissions and taxes, they will still owe the bank $118,000.
"Five months later, I lose $100,000," Taylor, a high school teacher, said. "I don't think I can take $100,000 into the stock market and lose it faster."
Friday, April 20, 2007
More Homeowners Upside Down
As housing prices continue to fall in the Washington area, recent home buyers who wish to sell often find themselves 'upside down' on their mortgage. Via the Washington Post:
Subscribe to:
Post Comments (Atom)
Posts
David,
ReplyDeleteInteresting... But I think DC will get a double hit; the condos will add to the exurb pain. Not to mention credit keeps tightening. Still loose, but that's never good for home prices. Rumor is Countrywide no longer does stated income. ;)
Almost back to rational. Almost. Now to see where my employer will ship coworkers this year... (No choice, the people will leave anyway) Sadly, two more coworkers just "up and left" to more affordable regions. :( At least two of our three major local competitors are doing far worse at retention. The third just shipped a large batch out of state... so the people who wanted to leave yesterday are already gone. Thankfully, none in my chain of command have given notice (so Neil doesn't have to explain why employees are leaving). ;)
Got popcorn?
Neil
Impossible. Lance says home prices only go up!!!
ReplyDeletePurcellville is not the "Washington DC Area." Truly. The 55 miles between DC and P'ville might as well be 100 miles. Who in P'ville heads to a restaurant in DC in the evening? Nobody. Too far and too much traffic.
ReplyDeleteDavid! You need to post stories about DC proper. Who in Dupont Circle or Bethesda is loosing his home? That what I am interested in hearing about. Thank you!
ReplyDeleteIt doesn't matter if people living in Purceville head to DC for a dinner, it matters if they commute to Tysons or Fair Oaks or Sterling to work, which they do because exurbs have very few economic primary activities. People living out in BFE are going to get hit the hardest by the housing downturn once the easy money is gone because the carrying cost - the transportation and time costs - of living an exurb are higher than living in a suburb within reasonable distance of where one works. Doubly so if gas hits $4/gal this summer.
ReplyDeleteFive months later, I lose $100,000," Taylor, a high school teacher, said. "I don't think I can take $100,000 into the stock market and lose it faster.
ReplyDeleteThat's a dumb statement. I feel sorry for this "teacher's" students. First of all this guy didn't have $100,000 to start with. He probably bought a highly leveraged asset, financing it using an I/O ARM loan thinking housing has nowhere to go up.
Welcome to reality pal. Would you be complaining if the house price was up $100,000 5 months later? No that is "normal" for real estate isn't it, as it was for the last 4 years. When you make a stupid decision live with the consequences instead of complaining about the circumstances.
The best reason to avoid a bailout is to make sure these bozos learn a lesson, or if the lesson is basically really harsh, so that others learn from their mistakes.
ReplyDeleteThat lesson is: think for yourself. The people who are getting really punished by this bubble are the type of people who would have laughed at blogs and internet columns two years ago, but worshipped the Washington Post or New York Times.
Now those people are waking up in their $350,000 house that they have a $600,000 ARM loan from 2005 on, and reading in the Post that there was a bubble. Too late for them.
I have little sympathy, frankly, for any white collar professional, internet-hating fool who bought in 2003-2006 and is now in serious trouble. These are the same type of people- and often the same EXACT people- who got burned on NASDAQ stocks eight years ago.
These buyers did NOT learn their lesson. They still believe that the internet is for extremist wackos and that the Washington Post will tell them the truth. Well, it is telling them the truth now-- but way too late for them.
I want no bailout until these people are humbled and have changed. When I see that humility, admittance of error, and willingness to change and be skeptical of the powers-that-be and their sycophantic media, then I will be more willing to reach out to help those harmed by this.
A Redskins fan
Anonymous 8:50 said...
ReplyDelete""Five months later, I lose $100,000," Taylor, a high school teacher, said. "I don't think I can take $100,000 into the stock market and lose it faster.
That's a dumb statement."
I agree, that is a really dumb statement ... but one that shows where the bubblehead mentality comes from. When did people stop viewing buying a home as a place to live and start thinking of it as a place to make money. No responsible person in their right mind who bought a house to live in would really expect to be able to sell a year later without taking a loss. The problem here though is that the bubblehead mentality is such that (some) people --- including bubbleheads --- view buying a house as an "investment" ... akin to buying stock. Any SANE person would not have bought a house if they were that close to a divorce. I can understand being caught blindsided by a job loss or other calamity ... but not a divorce. Those don't just occur overnight. Perhaps they bought the house as a way of "making it work"? Who knows ... But one thing for sure is that this teacher and his soon-to-be exwife were not in a position to be buying a house together that couldn't later be paid for by one alone considering how close they were to a divorce when they bought it.
Yay! People with financial problems! Alright!
ReplyDeleteditto on need for more coverage of DC-proper. House across the street from me in Dupont 3br/3ba nice but in need of some reno is asking 1.4 mill. my guess is that's 20% over market thse days.
ReplyDeleteYou guys are harsh. This guy bought this dream house with his wife, maybe with the idea of raising a family and living there until he dies. I bought my house with the same dream, and have never entertained the idea of moving.
ReplyDeleteCome on now, who wouldn't complain about a $100K loss? I complain when I find out peanut butter is on sale the week after I buy it.
This couple was willing to live with the loss, and it sounds they are willing to pay back the money to the bank. That's much better than the other stories we have been hearing about.
Anonymous said...
ReplyDelete"ditto on need for more coverage of DC-proper. House across the street from me in Dupont 3br/3ba nice but in need of some reno is asking 1.4 mill. my guess is that's 20% over market thse days."
I guess you might hope if you'd made the mistake of not buying sooner, but nope, it'll sell ... prices have continued to rise here as in any other place where real value has been accruing. (I.e., Just about every other place in the DC area other than Purcelleville ... which incidentally is NOT in the DC area anymore than Gary Indiana is in the "Chicago" area. Yep, you can get here from there, but you're not participating in life here ... You don't even have the same "local" channels on your cable or satellite system.)
When did people stop viewing buying a home as a place to live and start thinking of it as a place to make money.
ReplyDeleteAround 2003.
OK here is one for the naysayers.
ReplyDeleteThis is a brilliant video at generation risk at money magazine
click on the link then click on play
http://generationrisk.blogs.money.com/
Yay! People with financial problems! Alright!
ReplyDeleteThe housing market is in dire need of a correction. Celebrating that a correction is taking place is not a bad thing. An unfortunate side-effect of the correction is that people like Jeffrey Taylor are getting reality-checked straight into the glass and are losing a few teeth. That's not schadenfreude, it is life.
Now, if Lance stumbled into some dire financial straights, I wouldn't think it unfortunate. His outright hostile derision of people who say "$600K is too much for a 2BR Condo" has well eroded any concern I have for him as a person.
Lance, hope you were planning on living in that place for 15 years, because I think it'll take that long for you to get back into the black.
Lance! I have a great place to sell you. It is spacious and priced right. 550 sf for 1 Million. It is in a fashionable part of North West DC. Do I hear you making an offer!!??
ReplyDeleteLance, please explain what you mean by your assertion that "real value has been accruing" here. What is this "real value" you speak of? How do you measure it? How does it accrue?
ReplyDeleteresponding to lance. . . I know I know it's feeding the chimp . . . but sometimes you love to see the chimp make a fool of himself.
ReplyDeleteLance said . . .
"The problem here though is that the bubblehead mentality is such that (some) people --- including bubbleheads --- view buying a house as an "investment" ... akin to buying stock."
and
"Just about every other place in the DC area other than Purcelleville ... which incidentally is NOT in the DC area"
Lance's quotable quotes again . . . 1st off BH said prices are disconnected with reality . . . that's not treating housing as an investment, it's stating it's REALLY expensive and it doesn't make sense to buy. HH were saying it will never go down . .. buy now or be priced out .. . the same tired mantra of an investment not a place to live.
No lance it's disconnected b/c when you make 90-100k a year . . . which is more than the median household income in Loudon and you can't realistically afford (i.e. 30 year fixed not ARM, IO junk) anything but a flipping Townhouse . . . things are seriously messed up.
Point 2. It has not ALWAYS been this expensive in DC, and it won't always be this way.
Point 3. As long as Purcelleville, or any other exurb's housing prices are directly affected by DC (i.e. people buying homes there b/c they are cheaper, thus driving those houses up while commuting longer hours), it IS in the DC market.
Lance has taken a page out of any dictator or misinformation PR system.
Repeat a lie long enough you will believe it and actually convince others the lie was really truth.
John Fontain said:
ReplyDeleteLance, please explain what you mean by your assertion that "real value has been accruing" here
John, you sloppy fool, you missed another quote from Lance:
Yep, you can get here from there, but you're not participating in life here... You don't even have the same "local" channels on your cable or satellite system.
Obviously you have to participate in life and watch the same channels if you are to even understand Lance's comments. Since you do neither, this debate is mute.
Lance said:
ReplyDeleteThe problem here though is that the bubblehead mentality is such that (some) people --- including bubbleheads --- view buying a house as an "investment" ... akin to buying stock.
Does the NAR contribute to this "bubblehead mentality?"
To all the housing bulls:
ReplyDeleteIts not the bears that think of homes as a speculative investment, that has been the housing bulls.
Look at how much inventory there is out there in every segment. Look at America's negative savings rate and the high cost of home debt service.
We just exited the time of year when 90% of home appreciation occurs. We're now entering the traditional inventory run up. Normally sales stay strong, but listings grow faster than sales.
And look at the Credit Suisse report on ARM resets... they are just starting.
I stand by my prediction that by June Joe Sixpack will know home prices are declining.
As I noted before, its cheaper for my company to relocate workers than to loose contracts.
This is going to take years to play out too.
Got popcorn?
Neil
The real losers are the post-baby boomer generation of professionals in their late 20's early 30's who are trying to start families after trying to get their first home or already owning the starter condo.
ReplyDeleteHow in the world is this generation going to feed the baby boomers inflated lust for equity? As stated above, making $200K family income doesn't create the ability to get a reasonable mortgage for a 3 or 4 bedroom home in the DC area unless you already have equity to dump into it. you can scoff at the teacher all you want, but the truth of the matter is he, along with many others don't have many choices. Rent for 15 years until you can save up 20% of a $700K home, or buy and try to afford it. Given the bleek outlook, there is a definite feeling of helplessness among the generation that realizes they won't be able to afford a home like their parents did.
The real losers aren't the people inflating the prices that were able to use equity to invest in home flopping, the losers are the people that are stuck with the results of the stupidity.
Personally, I'm trying to figure out how I can get out of a town home and have enough room to start a family before I'm old enough to watch my kid graduate from HS before I'm a member of AARP. The choices are move further out (I hear Purceville is nice), or live in the townhouse I can afford, or become housepoor and vulnerable to the market.
I guess the final laugh will be on the baby boomers when my generation cuts social security and lets em all live out their lives in poverty, because we won't be able to afford to support them and ourselves / families. Hope you are using sound financial planning with all that equity.
anon 10:12 said:
ReplyDelete"Given the bleek outlook, there is a definite feeling of helplessness among the generation that realizes they won't be able to afford a home like their parents did."
Le plus ca change, le plus ca reste le meme. (The more things change, the more they stay the same.)
I remember thinking exactly like you back in the early 80s ... when incidentally the cost of homeownership was much higher than now (i.e., average monthly purchasing costs were something like 60% of average income vs. something like 40% now.) But we --- like the generation before us --- managed to survive. And so will you. The first step is to stop feeling sorry for yourself. You are in no worse position than generations before. And you are actually in a much better position than the baby boom generation which faced double digit interest rate mortgages (i.e., approaching 17%-20%)and not nearly as many of the wonderful financing options you have now such as interst only and ARMs. We had to really bite the bullet and do very much "without" to get that 20% down and to make the full PITI payments. You're lucky ... and you don't even realize it ... How ironic. For those that do, you sound like a real cry baby. Grow up.
Lance said...
ReplyDelete“You are in no worse position than generations before. And you are actually in a much better position than the baby boom generation which faced double digit interest rate mortgages (i.e., approaching 17%-20%)and not nearly as many of the wonderful financing options you have now such as interst only and ARMs.”
Yes! Those wonderful financing options!
“Lance”, it’s official, there’s no way you are serious. These “wonderful” finance options have resulted in increased foreclosures and talks of government bail outs. “Nothing to see here, move along people”, Yea…..right.
I have zero sympathy for these immature greed-heads.
ReplyDeleteSo six, eight months ago they were Buying The American Dream Of Home And Shared Future...
...now all of a sudden, oh, let's get a divorce?
Two people who can't make a marriage work are probably going to have hell's own trouble with things like deferring their needs, and erasing their greed.
And if their marriage was in so much trouble, why were they making huge speculative financial decision?
Maybe they need to sit down, shut up, send the lawyers packing, and figure out how to grow up sufficiently to honor the life and economic commitments they've made. See them through. Grow even further through deferring their whims.