Why did I buy a house in 2006? Am I a complete and total idiot?

Hey Flagpole, I just want to say that I enjoy your posts on the economy, if for no other reason than you are generally optimistic about it. Whether you are right or not...who knows, but at least you have a positive outlook. I used to enjoy watching CNN and other news programs, but they are so overwhelmingly negative, that I no longer watch them. Talking to my financial advisor the other day, he feels that all the negative attention to the economy only exacerbates the condition. He has seen many of his clients liquidate perfectly sound investments, only to put them in treasuries, CDs, etc. They apparently are willing to guarantee huge losses. This, of course impacts my pretty sound investments. For example, I'm a few years away from retirement, so my portfolio was fairly conservative: preferreds, corporate bonds, etc. Thought I was pretty safe, but have dropped $350K to date. Haven't sold, although tempted a few months ago. Thanks to you, my broker, and others, I resisted the urge to "stop the bleeding" and hang in there. I have a seven to eight year "window", so hoping it will recover by then. I'm also getting some nice dividends, which soften the blow somewhat. There is no question that the economy is ugly at the present time, but reading some posts, you would think we are heading for a major Depression. Sell, sell, sell, buy gold and canned food and head for the hills!! I'm amazed that the markets have stabilized as much as they have, with the doom and gloom out there. Anyway, thanks for your opinions....whether right or wrong. Happy Holidays!

You should be optimistic and buy this guys house.

X Runner wrote:

You should be optimistic and buy this guys house.

No, Flagpole's the optimistic one! My home, luckily, was purchased in 1995 and has appreciated a lot since then. It's gone down in value a little, since 2006. I'm very happy with a 5% mortgage and much equity. It's one of the bright spots in an otherwise glum portfolio. I will cash out at some point....too much equity and the taxes will force me to sell in a few years. Then, I might be interested in OP's house! BTW, I don't feel that the OP was an idiot; he just thought houses would keep going UP.Most people did, and the lenders added fuel with all their creative mortgages that allowed people to buy more expensive homes than they could afford. Now we've found out the hard way, and we're all paying for it, to some degree.

More than a year later I wonder where this situation stands.

I really must be on LetsRun too much, since I saw this old thread of mine bumped by toro today.

My situation is slightly worse now because we have a newborn and the wife's not working. And I got a 5%-15% paycut (depending on how you define it - it's complicated and I won't bore you.)

The house in question is still rented, luckily. To a very good tenant. But his lease expires soon. Don't know if he wants to renew. I gave up on selling it, for a while, but lately I've been meaning to list it again, this time as a buy-owner instead of with an agent. I can ask 6% less without an agent. I'm going to list it in the MLS for a fee of like $300. None of my neighbors have had any luck selling so it doesn't look very promising. But I'm going to keep trying.

By the way, I never mentioned that the HOA fee was $270 when I purchased in '06 and now it's $470!!!! SUX!!!!

Sorry, to clarify the above: I should have said "my FINANCIAL situation is slightly worse now".

Quite happy with the baby!!!! :)

Should have mailed the keys to the bank two years ago. I don't think you will see 2006 prices for another 15 to 20 years. If inflation adjustment is taken into account, you will probably never see 2006 prices again.

I live in Florida. If I foreclose here, they can go after my other assets. I think they can even garnish my wages.

But more importantly, I just don't want to foreclose. Foreclosure seems to be the trendy thing to do these days, but I just can't bring myself to do it. I would only do that if I had no choice.

Sorry to hear that.

The economy one year later thread made me think of this.

So, one year later you have lost thousands, not on paper but in actual cash that could have been used for purchases to truly stimulate the economy rather than give it to a bank that was likely rescued.

I have no advice to offer, no solution for the entire situation.

I don't think the bank can go after anything but your credit.

But now that you have put so much cash in there it would be even harder to walk away at this point.

Wait a minute. The interest you are paying is tax deductible isn't it?. So you should be getting a big chunk of change back at tax time, right?

toro wrote:

I don't think the bank can go after anything but your credit.

Not true. Lots of States allow nearly unlimited access to your money until eternity to recoup bank losses (Mortgage balance minus short-sale price). He would have to declare bankruptcy to fully shed the debt...and even then might have to pay some percentage of the debt.

Banks have been waiting years sometimes until they ascertain that your financial situation has improved before trying to collect the debt. They know that you won't file for protection later when things are good -vs- the bad times.

tax man wrote:

Wait a minute. The interest you are paying is tax deductible isn't it?. So you should be getting a big chunk of change back at tax time, right?

Nope, not unless he's living in the house for the deduction you're talking about. The interest IS tax deductible as an offset to the income generated from the renter though. That's not much of a comfort when you're not making any money from the real estate though.

Why Oh Why? wrote:

I live in Florida. If I foreclose here, they can go after my other assets. I think they can even garnish my wages.

But more importantly, I just don't want to foreclose. Foreclosure seems to be the trendy thing to do these days, but I just can't bring myself to do it. I would only do that if I had no choice.

what about selling your wifes house and moving into this one? then you can stick it out until the market gets better.

If he is worried about recourse or even just wants to protect his credit he could negotiate terms to pay the difference after a sale over time.

The bank should take this because it is cheaper than the effort to go after him. Just write it as an unsecured loan on the books. They don't have to ding his credit if it is negotiated right.

$60K over 10 years would be about $700/month.

He's already losing $800/month and not paying down the loan so the $60K looms as long as value stays low. Plus he has to keep thinking about the house.

Gotta get rid of the house. If banks can't handle toxic assets individuals sure can't.

"Pretty much everyone got fooled"

Yeah, sure nobody saw it coming. Makes me laugh every time I read that. I sold my home in California for $500K in 2007 that I bought for $200K in 1998 specifically and only because I felt the market was going to fold big time at any moment. It was pretty obvious when you match median household incomes to median house prices.

I had to convince my Realtor to sell it $40K below "market" at the time..."Yes I am sure I want to sell it that low! :)". Now I have to hide that money from the inflation monster that Bernake and Obama are creating.

I advise everyone to get out of dollar denominated assets like treasuries and cash. The dollar currency crisis is yet another easily recognizable disaster...that "pretty much everyone got fooled" on.

Senior Software Engineer wrote:

"Pretty much everyone got fooled"

Yeah, sure nobody saw it coming. Makes me laugh every time I read that. I sold my home in California for $500K in 2007 that I bought for $200K in 1998 specifically and only because I felt the market was going to fold big time at any moment. It was pretty obvious when you match median household incomes to median house prices.

I had to convince my Realtor to sell it $40K below "market" at the time..."Yes I am sure I want to sell it that low! :)". Now I have to hide that money from the inflation monster that Bernake and Obama are creating.

I advise everyone to get out of dollar denominated assets like treasuries and cash. The dollar currency crisis is yet another easily recognizable disaster...that "pretty much everyone got fooled" on.

I'm a Senior Software Developer living in California who has been posting on this forum for years about absurd real estate prices. Do we work together?

Most if not all of my colleagues are clueless financially speaking, so I am pretty sure we don't work together. They don't run either ... :)

I read about the housing bubbles for years in the Economist, before it happened. I don't know how everyone got fooled.

Senior Software Engineer wrote:

"Pretty much everyone got fooled"

Yeah, sure nobody saw it coming. Makes me laugh every time I read that. ...

I advise everyone to get out of dollar denominated assets like treasuries and cash. The dollar currency crisis is yet another easily recognizable disaster...that "pretty much everyone got fooled" on.

Senior Software Engineer wrote:

I advise everyone to get out of dollar denominated assets like treasuries and cash. The dollar currency crisis is yet another easily recognizable disaster...that "pretty much everyone got fooled" on.

I have $30k in EmigrantDirect. How can I move this out? Where do I move it to? The problem is, you're supposed to have 6 months savings in cash in case of financial emergencies. This is the only cash I have. So am I supposed to keep it as cash or should I protect it from inflation? Is there a way to protect it from inflation without tying it up in something difficult to liquidate if necessary?