Most of the homeowners I know personally are underwater

[cantdrv55]

Two of them are really worried about their ARM expiring next year. Zillow says their properties are both around 45% below their purchase price. No big deal if they planning on staying there long term, right? Except one couple had planned to keep buying up and eventually having enough equity to scale down and move to a townhouse paid in full. I never could work out their financial plan in my head. I guess I know why now - it doesn't compute! They are in a panic.

Still I feel bad for them. They just got caught up in the real estate feeding frenzy. Good thing they aren't near retirement yet.

[nostatic]

hmm, according to zillow my ex-house is now worth 1.28M. It peaked in late '05 at 1.5M, was down to 1.1M about 6-9 months ago. I think the note is about $500K now (fixed rate). Certainly not upside down (bought in '02) but as I've argued in the past, location matters...

[djmcmath]

I just got lucky. I bought near the peak, and the Navy had me moving 2 years later, as it was getting ugly. For whatever reason -- and I don't understand why -- two months before my house was on the market, half a dozen other houses nearby sold for way more than they were worth. My house sold in less than 90 days, for enough money that I was able to pay the Realtors and take my down payment. I thought I'd be in trouble, but ended up doing ok. (whew!)

We sat in an apartment for a year, and now we're living in a house that we bought from an old lady who was leaving to go to a home. She was here for 60-something years, and took pretty good care of the place. And she only paid like $6K for it, so our offer -- which probably would have been looked as just plain stupid 2-3 years ago -- was happily accepted.

So we're not upside-down at all, which makes us rather the exception. I'm happy about that.

But you're right -- a lot of my friends are upside-down. The guys in SoCal are hurting the worst, of course. I had dinner with one of my friends there a few weeks ago. They bought after it had been falling for a while, and they're still down 25% or so. (shrug) The cool part is that they're ok with that -- they can still make the payments, no problem, and have no intention of moving or selling soon, so it's ok. Upside-down? Sure, who cares? I guess they're the responsible exception these days.


Dan

[Jim Richards]

http://money.cnn.com/2009/05/05/real_estate/underwater_homeowners/index.htm

[pwd72s]

Bought the place in '76...it's been paid for for decades. Nope, don't think I'm "underwater". Sure the value has dropped, but I have to live somewhere, right? What angers me is that property taxes keep climbing...taxes supposedly based on property values.

[JavaBrewer]

Originally Posted by nostatic

Certainly not upside down (bought in '02) but as I've argued in the past, location matters...

+1 Of the 30 or so families we know & associate with I guess 5 may be in hot water due to a combination of -equity and stalled (crashed) job market in construction/landscaping. The others are thus far, baring long term job loss, are in good shape, myself included. I know 20+ of them are still + on home equity.

[Porsche-O-Phile]

Not to worry, the government will just print more money and raise taxes on the rest of us in order to bail out these poor folks that were obviously forced at gunpoint to sign their purchase agreements by their mean evil bankers. They're all victims and obviously have nothing whatsoever to do with the predicaments they now find themselves in due to buying into a bunch of sales-driven hype or speculation or anything like that. Oh no.

[red-beard]

How can you trust Zillow? They changed the data on my old place in San Diego. Previously, they had it listed as being valued near $800K, now they say it peaked only at $682K.

[mikester]

We just refi'd and our appraisal was only about 80k more than when we bought it in '04.

It was enough. Our note is only about 70% of that - not underwater and we are in Los Angeles (near the beach).

[HardDrive]

Most of the home owners I know are NOT underwater.

[m21sniper]

I'm looking at a 4 bedroom in upstate Pa in the mountains on 10 acres for.... $50k.

[Rick Lee]

Zillow is useless. Look at $/sq. ft., population growth and area median income, maybe replacement costs for future indicators.

I think I'm a little better than even on my condo in VA, but it's rented out on a two-year lease and for $25 a month positive cash flow. My parents' mortgage payment is around $1200, balance is $250l'ish and the house is still worth around $2 million. I'm trying to convince them that now is the time to be making extra payments on that one. Their ARM just adjusted down to the mid 3's. My ARM is at 4.875% and I think it too will adjust down in November.

[Cdnone1]

Originally Posted by m21sniper

I'm looking at a 4 bedroom in upstate Pa in the mountains on 10 acres for.... $50k.

Does it have windshield wipers on it or is it already up on blocks?

Steve

[GH85Carrera]

Originally Posted by cantdrv55

Except one couple had planned to keep buying up and eventually having enough equity to scale down and move to a townhouse paid in full. I never could work out their financial plan in my head. I guess I know why now - it doesn't compute! They are in a panic.

Still I feel bad for them. They just got caught up in the real estate feeding frenzy. Good thing they aren't near retirement yet.

They were gambling with the price of houses. That is really no different than investing in the stock market. The good news is a house should eventually go back up in value as it is a "real" investment.

It sucks for them, but they gambled and lost. At least they did not invest in Enron!

[Porsche-O-Phile]

On a long enough timeline, everything will go up, at least in terms of "absolute", raw number dollars.

"Real" dollars is another story entirely. Given how hopelessly out of whack RE prices were with the inflationary curve from about 1999-2008, it's unlikely that anyone who bought during that time will ever make back what they put in - at least in terms of real dollars (factoring in the effect of inflation). When you look at historical price data, RE prices have virtually mirrored inflation for the last 120+ years. That is until this last bubble when the two curves became uncoupled and RE prices were on the order of 2-5X their typical value based on where the inflation curve indicated they should be. Simply put, people paid 2-5X what they should have in terms of real dollars. In the next couple of years as inflation replaces deflation and starts to really take hold (it will) and RE prices continue to slide, the net effect will be that the curves will fall back into proper relationship with one another and there will never (unless there's another bubble like the one we just had) be another opportunity for people to sell and make back enough real dollar profit to make the transaction worth it.

Sorry, but I'm not buying into any of this happy talk about real estate. The problems that this last bubble created are just barely beginning to be understood by the public-at-large. The real effects will last decades and will not be washed away by a lot of positive talk about what a wonderful investment RE is. Bull. RE will be a lousy investment for the foreseeable future. Maybe in another 10 years it'll make sense again (kinda') but I doubt before then.

This is an "L" bottom, not a "V" or "U" bottom. There's no reason to buy now. None. Other than possibly getting a decent rate (and I suspect we've still got several more months of low rates before the Fed has to start jacking rates to combat explosive inflationary pressure, which is lurking just over the horizon).

[Hugh R]

Bought 12 years ago for $330K, was a bank repo and put about $40K into it. Was up at about a mil, now solidly $650K, I have a 4.675% APY, and owe under $200K on it with 9 years left on a 15 year mortgage. I think I'm fine.

[cantdrv55]

Good for you Hugh. I'm pretty much in the same boat but WSJ says 46.5% of homeowners in two cities in Solano County where I live is underwater. 46.5%!!!

[legion]

Don't worry Jeff.

Our current fiscal and monetary policiy is aimed at making sure those assets never devalue by printing money and giving it to the people most at risk. Of course, that can only mean one thing: hyperinflation when the printing presses start rolling.

[Rick Lee]

Hey, I gotta live somewhere. The house I'm renting now is worth over $100k less than it was listed for sale at when I signed the lease in Feb. 2008. Sure am glad I didn't buy then. Still, the bang for the buck in AZ compared to where I came from in VA is just astounding.

[Gogar]

I bought my house 13 years ago and right now I figure I'm at about 22-25% LTV. So, not everyone is underwater.