I would say “the truth”, but that doesn’t seem to help much, either. I had a conversation with an old buddy at work in late July where he complained that the current price of the condo he purchased in early ’06 was half of his purchase price. I asked him about the loan he took out and, sure enough, it was a 100% financed 2-year “exploding” ARM. He insisted that the loan wouldn’t be a problem because of how easily he would be able to refinance once the rate resets. I tried to explain to him that the financing he was referring to would likely be long gone by the time his day came. His response was something along the lines of “Lender_x is offering fixed-rate 100% financed mortgages to anyone with over a 500 credit score.” I cut bait and changes the subject…
Another close friend over lunch went into the whole bit about how his neighborhood won’t be affected by the slump with the same results. Granted, he’s in much better shape than my buddy from work, but neither of them were willing to listen to reason. It’s always “It doesn’t matter,” or “My friend in real estate says sales are fine,” or some other speculative excuse.
My mentor at work just bought a new house in Lemon Grove at the beginning of the year boasting that it was a “great deal on a foreclosure”. It is his family’s first home. Regardless of the price or financing, how am I supposed to act anything but excited for them? The guy walked around the office like he was high on life the entire week before moving in and still appears to be content with his decision.
Another work buddy bought a house in Temecula financed with a sub-prime “no-doc” loan that reset right before the Fed started upping the rates. He knows his situation and is trying to keep current on his loan, but eventually he’ll break just like the rest. I didn’t have the heart to tell him the market was just going to keep getting worse. That was 3 months ago now and we haven’t talked about his situation since. I think about him every time I see videos of neighborhoods in Riverside where every house on the street has a “For Sale” sign up.
In hindsight, I probably should have just shrugged, lied and pretended that everything was gonna be alright. Lesson learned, but it’s still hard to hold back the truth from friends. I find myself surrounded by people that I care about that are getting screwed by a market they knew so little about before jumping in. My only relief comes from the opportunities I’m creating for my family by not having bought into the hype.
