[calidesigner]

Cashman, I lived with my folks in Diamond Bar from 1991 to 1998. While it was only a townhome, granted, they bought at the worst possible time, 1991, and saw the value of their home plummet a good 20%, and this on top of the loss of value that had already occurred between 1989 and 1991. Ultimately they (we) rode out the downturn, it wasn’t easy or pleasant and it wasn’t fun living with my parents, they were a grumpy frustrated mess. All this despite the fact that they could afford their mortgage. They felt trapped, and that’s what kills you…you can afford a bigger place, a better place, but anyone with sound economic judgement will never sell their upside-down negative equity home until it either regains it’s value, or else they are forced to. You will probably never be forced to sell, but you will be trapped in that house for a good number of years.

I must stress that my experience as a non-owner, but living with homeowners (my folks) during the last downturn leads me to conclude that losing value in one’s home affects people psychologically and emotionally in a very negative way. You have a lot of money in the bank, but so did my folks at the time (they didn’t have millions, but a few 100k), and my dad was about your age at the time, so you’re already entering the cranky middle-age phase that I’ve seen my dad go through (and I will go through too in a few decades), as someone who is a son, to someone who is a father, do yourself and your family a favor, and don’t go down that path of negativity and frustration which is sure to follow in a collapsing housing market. Home-ownerhsip pride isn’t everything. Spend your time and money connecting to your children and grandchildren. And make a lot more money; don’t throw it away for the sake of pride. Regards.

calidesigner

[calidesigner]

I often think of Bill Gates when questions of wealth/success come up. I’m no student of his trust me. However, I do wonder if he genuninely considers himself “successful”. Does he consider himself wealthy? Or is he continuously chasing the illusive realm of “I’ve made it, this is it”…

I am the sort who day-dreams about financial wealth but frankly isn’t the sort who is capable or willing to do what it takes. As a result, as financial needs increase (car, rent, children etc., 401k), I take steps necessary to fulfill those obligations, such as getting a better-paying job, taking an exam, courses, etc. I guess I like my weekends and sleeping in on Saturdays a bit much!

I don’t have what it takes to be a billionaire, and I say this because I sense that besides intelligence, timing and financial acumen, a person needs to be, in my opinion, somewhat pathelogically obsessed (or driven you might say), to really “make it”, such as Bill Gates, Richard Branson, etc. So you see, I make myself happy by convincing myself that infact really really rich people are essentially slightly demented. I’m normal, yeah! Maybe if inflation keeps up I might be a millionaire by my sixties, huh? Unless my 401(k) tanks! Nonetheless, I am serious about not getting bamboozled by the local-socal housing market. The last few years have got me upset enough to take the time to learn as much as I can, as Perry Chase says, so I can perhaps actually make housing work for me, or at least not work against me. This site and the contributors have opened my eyes over the past year, given me psychological support and data to counter the “owning a home is a blessing” crowd (yes it would be if I hade bought 10 years ago but I didn’t have a real job back then). Thanks to all of you…and may 2007 bring good sense and hasten the collapse of our glorious housing market.

calidesigner

[calidesigner]

There will always be homes selling, and buyers buying, and that is ultimately a good thing! Because it is this liquidity in a sinking market which propels the market to sink even further, until it reaches it’s bottom. Yes, people buying have there reasons, whatever they may be. They may simply be able to afford it, or they may, as pointed out above, be buying into the suicide loans, whatever the case may be, such buyers play an important part in this story. After all, they will buy a home priced lower than what the neighbor down the street is selling for, even though that home is still severely overpriced. Then, if the neighbor is motivated to sell, they will have to lower there price too…and so the dominos continue to fall. The point is, if you want to buy for sane reasons and not just because “I want to own my castle, etc. etc.”, than you will sit on the sidelines, pop the popcorn, and enjoy the show, all the while renting for waaay less than it would cost to buy with a sensible loan.

calidesigner

[calidesigner]

Bugs,

Good advice. Thanks.

calidesigner

[calidesigner]

The basic psychology has changed somewhat, and is continuing to change. It is getting more and more negative, and I don’t see any gushing positiviy around (save for the NAR, who can manage to see a positive in a market that couldn’t stop increasing to the stratosphere, no wait, okay, would increase a bit more slowly, no wait, would land “softly” with stable prices, no wait, would dip just slightly cuz that’s a good thing for buyers, no wait..on and on and on, the rubbish factory churns steadily!!!)

What else explains the lack of buyers, and the still large inventory? The continuing decrease in Mean price/sq. foot as Rich pointed out in the charts? Most of all, when all is said and done, despite the mix of wishful thinking and facts that we use to guide us, I believe firmly that recent history is rock solid, and for the most part, indisputable. History tells us that this ship is sinking. My folks bought property in Southern California in 1991, not doing there homework, and they didn’t recover their original purchase price till 1997 or 1998. And that was typical, not an isolated case! I can tell you for a fact that a decrease in interest rates doesnt make a $500,000 piece of rubbish property and more endearing or attractive to me (I’m a renter), I want that damn price to come down, period, to something fair based on fundamentals, such as comparing what it would cost to rent that property vs. a 30-year mortgage with 10-20% down…

Also, I did a quick comparison on Excel, looking at the monthly payment on a $500,000 mortgage with 0% down (typ. these days), 7% interest with 2% prop taxes, between a 30-year and 40-year loan. the 30-year payment is $4,159/month and the 40-year payment is $3,940/month, a difference of $219. That is something, yes, but it’s not going to make a tremendous difference, it won’t bail out people who already have negative equity in there homes! Who will refinance them anyways? I believe in history and facts, so far, both lead me and others to an increasingly glaring conclusion: this ship is going to sink, who knows how deep, and how long it will take, but sink it will.

calidesigner

[calidesigner]

Renting for 20+ years….

Purely as an anecdote, I personally know a family in the Inland Empire/LA county area who have been renting for the past 20 years, in various suburbs of LA. I have known them for 20 years, one is a college professor, the other a teacher, and I suspect they could have afforded to buy something at any time during those twenty years (perhaps a townhouse/condo intially), but they apparently always found it more affordable to rent something slightly bigger than they could afford to buy. Whatever the reasons, in the past twenty years, I know for a fact they have lived in only three rented, detached single-family homes.

Now I’m not even pretending to promote renting vs. buying especially over a period of 20 years, in fact if I was in their position I suspect I would have bought a place 10 or 15 years ago, but I’m simply presenting one anecdotal case of a family who raised two successful college-educated kids, maintained a very comfortable lifestyle, always lived in a detached 4-bedroom home, and didn’t have to move all that much over twenty years, all the while renting all those years. Now, they’ve purchased two homes in Houston, both rented out I think, and one will be there retirement home in 5 or so years.

Simply, there are many paths to lifestyle fullfilment, yes some bring more profit than others, but home-ownership doesn’t necessarily always, everytime, equal bliss, you can find contentment without owning as well, it would seem.
(Having said that I personally would rather buy when it makes sense, if I can afford it, have down-payment, and rent-vs-buy is about equal).

What say you other Piggingtonians?

Calidesigner

[calidesigner]

calidesigner

FormerOwner:

Interesting point and article. But I see it from a different perspective than those people quoted in the article, that it’s not really an ascension into cozy middleclass-dom, instead it is further confirmation of subprime mortgage brokers targeting a group who should know better, but apparently doesn’t so far, and is bascially being taken advantage of. Even the article breezily mentioned that it is due to low interest rates and relaxed lending practices, combined with two, three or even four incomes, which makes it possible for these families to supposedly rise into the middle class.

calidesigner

[calidesigner]

calidesigner

yup, that sounds about right. Recently was driving with a coworker, who lives in the greater L.A. area, and he was going on about how he’s trying to help his oldest kid get into her first home, and of course I being a piggingtonian through and through, started going through the check list of exotic mortgages causing upcoming forclosures, unsustainable prices compared to fundamentals, etc. To which he responded, yeah but the PAPERS still show prices going up a little bit in greater LA from last year…..to which I responded with…silence. Yep, the sheeple haven’t yet woken up and smelled the coffee.

calidesigner

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