It’s also fun when extended family get involved and look down on you for ‘selling out.’ That pressure alone was almost enough to keep me from selling. But I did anyway and since the sale have felt more isolated, even though we are being proven right by the market. All sorts of emotions come into play. The perception that family develop that you don’t manage your finances well enough to be able to afford a house, for starters. Never mind the fact that everyone else in the family has ARMS, and one I know of paid 200k for a house now worth 700k, and somehow now has no equity at all. Owning a home goes beyond pure financial matters and speaks to your worth as a man by God! The American dream with a white picket fence!
We often talk about forclosures, but even those who aren’t that deep in trouble can find themselves financialy screwed. EG: Three relatives above, all make approx 90k-120k/year. One paid 650 for a home worth 650. Another paid 1 million, now worth 950 (2 months later), and the last paid 470, now worth 725 or so. All three have used equity loans, and all three have staked much of their financial future on the belief that the market will go up, level, or go down only a little. If it crashes, they’ll be living on raman noodles and mowing their own lawns!
And they question my judgement? There’s a huge paradigm shift that needs to take place here and it’s slowly happening. You no longer ‘have to get in before it’s too late,’ and it doesn’t ‘just keep going up.’ I sold for 750k in March and in my mind everything above 450k or so was pure ‘speculative equity’ and not justifyable by any economic formula. I needed to grab that equity before it was too late, like a 40 year old virgin at the end of a hot date.
The sad thing is that people out there actually believe current prices reached their peaks because of supply and demand, rising incomes, low interest rates and because we have nice weather. Not only did they fail to pay attention in economics, but they obviously didn’t even sign up for psychology. The game is over folks. If you haven’t cashed in your lottery ticket or decided not to go for the million yet, enjoy the ride. May this crash be a peaceful one and bring you much wisdom so that you don’t sacrifice your family future in such a foolish way again. Call me when your home is down 40% and I might bail you out, but meanwhile I’m busy fully funding my children’s college plans, fully funding my Roth IRA for two years for my wife and I, and planning to go to the Midwest and buy a house with cash, never to have a mortgage again. I’m using the rest to buy warm clothes!
