Feeling A Bit Left Behind
by Englishman in NJ
I’d like to tell my house buying story to the HBB crowd, mainly because it says something quite profound about the attitude people have toward house prices and the complete lack of logic and reason they use in this matter.
I work for a very large bank in NYC, in the MBS and ABS business (eye of the storm, as it were). I got married in 2004, moved out of the Battery City apartment I was renting into a house rental in deepest, darkest NJ, close to where my wife comes from. After getting married we were considering buying. Even although I work for one of the largest mortgage lenders in the world, I decided to contact a couple of “mortgage brokers” referred to me by my in-laws. One said that given my credit and income I could get a loan for “over $2 Million” with nothing down. My income was approximately $300K per annum at that time. I went home and told my wife we were not buying for a while because something incredibly insane is going on. Later that week at a family function, a BIL tells me that I should “buy something for $700K or $800K because there is no chance you will lose anything at that price”, implying that is a “low-end” purchase. (This is a man who purchased a lake-front property, in Wayne, NJ for Christ sakes, for $1.7MM in 2004 and just had it appraise for $800K!)
That sealed it, I told my wife we were not buying for a long time. Years of happy renting go by with us saving nice chunks of cash. I do have a slightly uneasy feeling though since so many of my friends and business associates “own million dollar homes” and second and even third homes around the US. I have a feeling of being a bit left behind. I suppose I was since I had no debt of any kind, nor did my wife.
Fast forward to 2008, wife gets pregnant with twins. We need to move closer to her family since she will need a support network to give her some help. Family all lives in Pines Lake area of Wayne, considered very high-end (think The Housewives of New Jersey). Despite my reservations we really do need to buy because there are no rentals in this area. We end up buying a house for $565K that the prior owners tried to sell 18 months earlier for $750K. Hey, instant equity!!!!
I continue to be astounded just how little people understand house pricing and the value of money when it comes to buying residential real estate. My shoeshine moments came when someone tried to lend me an amount SEVEN times my income with no down payment, and my hick of a BIL (wife’s sister’s husband) tells me I can’t lose if I buy for ONLY $800K. Repeat this pattern throughout the western world - don’t even get me started about the UK, even seasoned HBB’ers might not believe what has gone on over there and even continues to go on to some extent.
I’m delighted with our purchase. A small, very manageable mortgage that can be paid off if I lose my job (a very real possibility) and close proximity to my wife’s sisters and parents, these are very nice people indeed so I’m happy to see them in our house. We now have 11 month-old twin girls and are settled in a nice house with manageable costs. Of course, I could be looking for work at any time, but at least we have budgeted sensibly and I’m blessed with a wife who is completely non-materialistic.
So, my RE story is a happy one to this point. However, let me add my voice to the chorus here about the current situation, at least here in the Northern NJ enclaves I’m now familiar with. People are still in absurd denial, massively in debt and no prospect of imminent relief. They are struggling mightily to reduce their spending, those habits are so hard to break. The keeping-up-with-the-Joneses ethos is still dominant, but trust me, many peoples lives are slowly falling apart. Heavily drinking, explosive tempers, divorces, depression, mental breakdowns are rife in our small world. It’s a tinderbox. Rinse and repeat almost everywhere, I’m sure.
So many “leading lives of quiet desperation”. I somehow think Henry David Thoreau would find great inspiration in 2009.
