To Prosper Again
-by The Mysterious Flying Miser
Recent headlines have made much ado about homeowners who tap themselves out trying to pay their mortgages and keep their houses. And recent spending has been aimed at helping them do it. An oft-repeated premise behind this action has been that homeowners must be saved from the only tyrannical outcome of foreclosure, a fate on par with homelessness: renting. But is this assumption valid? Are we really helping homeowners in this environment by encouraging them to pay their unaffordable mortgages? What exactly becomes of them once they leave their houses? Do they die, or are they …better off renting? The truth may shock you.
In 2005, Robin Kerr Drulard was a real estate investor, so she bought an apartment in Hollywood, FL. Her monthly mortgage, HOA dues, and maintenance set her back about $3,000/month, but she was sure she would make a profit by holding the property for a short while before selling it at a higher price. By 2008, the 1-bedroom, 1100 sq. ft. ocean-view apartment had lost much of its value and was foreclosed upon. She lost her entire down payment of $36,000, along with $300,000 that she put down on multiple other investment properties, and will declare bankruptcy at the end of this year. She will also lose a small cottage in upstate New York as a part of her bankruptcy.
But 53-year-old Drulard says that life is better since she got out from under her onerous investment properties and began renting a nicer apartment across the street. Her new 2-bedroom, 2-bath, 1700 sq. ft. apartment with wrap-around views only costs her $1500/month, which means she can save money, live comfortably, and work on her new business that helps people save money. When asked how she feels about her future, Drulard states “I feel great! I learned a lot, crashed, burned, came out alive, and I am ready to start fresh and prosper again.” She also thinks that, with foreclosures becoming so common, “if landlords don’t want people with damaged credit or a foreclosure on the records, they will lose their whole rental base.” Drulard’s husband shares her optimism, but she says that many of her family and friends are less understanding.
Brad, a 33-year-old San Diego resident and electrician, bought a condo with his wife
in August of 2005. The monthly mortgage and HOA dues on the 684 sq ft unit were $1867/month. By June of 2009, the value of the condo had dropped precipitously, so Brad arranged a short sale. The loan payments, initially requiring them to pay interest only, cost them $700/month above what they could collect in rent.
By the time they sold the condo, they had a 14-month-old and another on the way, so Brad was happy to have the 3-bed, 2-bath house he rents today, paying $2,125/month. Brad was not required to make a down payment, so the only thing he feels he has lost is his good credit. “Our life has definitely improved lifestyle wise. However, there are a lot of credit ramifications that we didn’t anticipate; such as the credit card companies monitoring your credit and lowering all your limits because of any negative marks, regardless of (your history with) the creditor lowering the limit. …Another reason (I feel my life has improved) is that we were covering the negative balance of the rent coming in. We were paying an extra $700.00 a month in hopes that we would get a loan modification. We wasted a year and a half spending that extra money, and that’s one of the reasons we’re in the debt we’re in now.”
Brad’s advice to anyone else in his situation: “I hope others out there that are underwater give up the ‘loan modification’ route. It is a waste of time and the banks are not as willing to work with you as they say they are. The best thing to do if you foresee a shift or loss of income is get the hardship documents into the bank ASAP. Get approved for a short sale before you list the property. That way, you can advertise it as an approved short sale. You will end up with multiple offers, and you won’t make a potential buyer wait while you wait to get a final approval. There is really no quick fix for the upside-down home, but if you are considering a short sale, then get the paperwork 100% complete before you send it. Otherwise, the process is delayed by weeks. That was our experience and we were lucky to have the buyer stick it out with us; we would have had to go into foreclosure otherwise.”
A 58-year-old retired biomedical researcher and freelance writer, Sue Chehrenegar bought a house with her husband in Culver City, CA in 1987 with a 30% down payment. They refinanced the 3-bedroom, 2-bath house several times, and then sold it in December of 2006. She went through a grieving process when they sold their house, and still keeps in touch with the real estate agent. “I felt sorry for my granddaughter,” says Chehrenegar. “She and her parents stayed in our home from May of 2006 until January of 2007. She was almost walking when we sold our home. I never got to see her playing in the yard.”
But Chehrenegar was able to use the money from refinancing to cover added and unanticipated expenses in her retirement, and to help care for Mr. Chehrenegar’s mom without accumulating debilitating debt. She also made enough profit from the final sale to cover 10 months of rent on their new apartment. She says that her life today is much like her life 30 years ago, and “As long as I have a computer, and as long as I can keep writing, I feel that I have some control over my future.”
My thanks to the Miser and those who agreed to be interviewed. More to come.
Excellent. I can’t wait for more from Miser, and one from Olygal.
Hmmm, how long until the “brain trust” guesses who the “Miser” is?
OK, My first Guess, The Miser is……
…..Casey Sarin?
Got it in one!
Palmy said it would be Alan Greenspan, but if it is, he’s had a brain transplant.
Who are the “plane” types among us?
XGs, Mikey… I can’t remember all of the handles, but there is a disproportionate number of aviation peeps here.
It could be anybody!
Proud A & P here (not a maintenance tchnician) checkin’ in from KLGB Muggy….
If you triangulate Florida, San Diego and Culver City it becomes obvious who the miser is:
Arizona Slim
It HAS to be Olygal.
She admits that has a cape, tights and fights evil.
Wow that was quick. I googled “The Mysterious Flying Miser” and it shows Ben’s HBB as the source.
That’s a fine piece of reporting that needs no comment.
I agree, I really “hope” someone who can make a difference reads that, could save this country a LOT of money.
I contend that the PTB know perfectly well people would be Better Off Renting, but the banks would be worse off if the homedebtors all suddenly recognized that fact. The point is to keep people paying mortgage debt as long as possible.
I oughta know, that’s certainly MY agenda.
When you look at it through a lenders eyes, keeping people paying their mortgages, and serially refinancing back to a 30 year term makes a lot of sense. I guess the bankers did not foresee people doing the maths and just walking when it got too much to maintain their debt, hmmm, if only the bankers had not got too greedy?
She went through a grieving process when they sold their house, and still keeps in touch with the real estate agent.
Why do people get so attached to “stuff” that they just bought and could never really afford anyways. I mean, if this house was built by your grandfather 100 years ago and you were born in it is one thing but a house you just bought 3 years ago is another…
“She went through a grieving process when they sold their house, and still keeps in touch with the real estate agent”
There really must be something to that saying “When you dance with the devil, he never lets go ”
I actually met with a woman, a professional ballerina, that upon his request danced with Dr. Mengele. Swear to God.
People do the damnedest things when they feel they must.
That reminds me again; how are the squirrels doing in Menlo Park, Ca???
Hah! I have often wondered that…… perhaps they have all “accidentally” died of anaphylaxis from dodgy feed-stuffs.
Maybe they have starved to death as the property has been vacant in foreclosure for the last year.
Perhaps the “owner” has had to eat them.
So many questions, and so few possums!
Um, she bought the house in 1987 so owned it for 20 years. I can certainly understand her grieving a bit. I am sure there were a lot of memories and a lot of life lived there. People aren’t attached to just the ’stuff’, they are attached to things because these things have become part of their lives. When I sold my house in 2004 and moved to NZ, I certainly had a bit of grieving, as my daughter had grown into a teenager there, we had friends who were neighbors, we had memories of summer days at the swim club, and of course memories of all the things we did to make our house a home. My daughter’s initials are forever etched into the concrete I poured for a shop floor, the playhouse and swing set that she so enjoyed are still preserved in pictures, and the evenings on the deck with friends will always be remembered.
This is exactly what a **home** is for — raising families and making memories.
It’s a shame that the PTB have brainwashed the masses into believing that houses are investment vehicles to be bid up with the most leverage possible.
Very good point… another truly wonderful contribution to our society courtesy of the Real Estate Machine..
OH NO Please don’t destroy the great band named REM
Um, she refinanced it several times over 20 years, and sold it in December 2006. This is a success story resented like a tragedy. The only reason it sounds sad is that she “owned” a house in CA for 20 years and sucked almost all the crazy juice out of it before the final sale, so there was only a small check remaining at the sale.
The monthly mortgage and HOA dues on the 684 sq ft unit were $1867/month
Wow, I can’t imagine paying so much for such a tiny space. All of my expenses for a year average out to only $1500/month and that’s because I spend too much on food (which tripled in price over the last five years according to my records). Yeah, I’d say they are better off renting if owning costs so much more than the average wage earner could afford. I just switched to owning because it was cheaper than continuing to rent (and a nicer neighborhood). Selling platinum and treasuries at their respective tops made most of my down payment (after the stocks I was planning to sell lost all their value).
I have about 50% more than it would take to pay for the place outright, but l’d rather keep the money available for flexibility at the moment since it’s only a 4.85% fixed rate mortgage. How hard would it be to get the money back out of the place if I paid it off and then needed emergency funds, eh?
Recently I’ve been buying insurance on everything, from multiple insurers because I don’t trust any one of them. The financial advisors at the bank I no longer use used to sneer and call me “risk averse” when I declined to throw all my money into the market before it crashed. Tried to talk me out of putting money in precious metal and treasuries while they were at their lows, too. Idiots.
You know, term life insurance payouts are tax-free and you’re guaranteed to die sometime. It’s a better investment in the future than real estate. They even cover suicide after a two-year probationary period now. Feel free to quote me on that.
some places are crazy … I was paying $2,850/month for a 540 sq ft. apartment in Manhattan. Now I am paying $1495 for about 350 sq ft.
That Manhattan studio is 9.9 times our cost/sq ft (owning). Some places have a ways to go to legitimately even reach “crazy,” down from insane…
*picks jaw off floor* In my head, I knew people paid insane amounts, even for rent, but seeing it in black and white is astonishing… I pay less than $1495 for mortgage, taxes, insurance and extra principal on my 1900 sf house on a little over half an acre (and I’m in the expensive part of town).
Just… wow!
It seems so simple and so obvious the stress, the heartache, the fear of making your payment and feeding your family is so not worth the status of home ownership. I stated on a blog about 2 years ago that quality of life will be a big issue, most people equate quality of life with ownership. The ownership status and quality of life equation is not panning out for many people. The more people that come to the realization that renting and living modestly in a way you can afford is much more rewarding and satisfying, the quicker we can be over this horrible point in history.
“The more people that come to the realization that renting and living modestly in a way you can afford is much more rewarding and satisfying, the quicker we can be over this horrible point in history.”
But the gov’t and MSM seem to be doing everything possible to keep the sheeple thinking they DESERVE to stay in their homes, that all the stops are being pulled out to keep them there, etc. rather than letting people realize there is indeed life after a short sale or foreclosure, and that life will likely be less stressful and more secure over the long haul (less debt, lower cost of living, higher savings, etc.).
And I fully believe a lot of this propaganda is to benefit the banks, and has precious little to do with keeping J6P as a “homeowner.” Think of all the sob stories we’ve heard versus people saying they’re way better off without the house.
quality of life in an abode equals :
2car garage,
2/2
working a/c
ground level(no stairs to climb)
decent nabe, close to work.
Not expensive.
Well 5 out of 6, not bad.
Wish rents were lowering. I I don’t see it yet.
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It seems so simple and so obvious the stress, the heartache, the fear of making your payment and feeding your family is so not worth the status of home ownership. I stated on a blog about 2 years ago that quality of life will be a big issue, most people equate quality of life with ownership. The ownership status and quality of life equation is not panning out for many people. The more people that come to the realization that renting and living modestly in a way you can afford is much more rewarding and satisfying, the quicker we can be over this horrible point in history.
My sister is holding on to a house she cannot afford for god only knows why. It is to the point she gets so stressed out she crys and does not eat for days, it is really taking a toll on her health physically and emotionally. What was put in the water that so many americans think a house is that important I mean it is just stuff. It means nothing in the grand scheme of things.
sorry for multiple posts I have been coming to this site for about three years, and have only posted once or twice.
“What was put in the water that so many americans think a house is that important”
This question will be pondered on long after we’re gone.
I think the urge to own property has been with Americans since colonial times. What overtook us was the investment ideology of the late twentieth century, which benefitted the financial services industry by giving ordinary people the illusion that history had ended and that increasing asset prices were now a permanent reality. Like they say, if you don’t know who the fool in the poker game is, it’s you.
that is a true shame… I hope your sister gets through this.. yet, one of the many, many, many examples of why everyone associated with Real Estate is the enemy until housing is back in balance and the mania is finally dead… although your sister is still responsible for buying that house, she’s also more than likely a victim of a masterful marketing campaign that had every American scared to death over houses… unleashed on all all courtesy of the machine and all the idiots who allowed it to go unchecked or who helped fuel the mania…
“homeowners must be saved from the only tyrannical outcome of foreclosure, a fate on par with homelessness: renting. But is this assumption valid? Are we really helping homeowners in this environment by encouraging them to pay their unaffordable mortgages? What exactly becomes of them once they leave their houses? Do they die, or are they …better off renting?”
Did anyone catch NOW on PBS last night? It focused on Max Rameau’s organization “Take Back the Land”, which practices civil disobedience by helping homeless families squat in foreclosed or abandoned property until they can get on their feet. Normally I’d be incredibly hostile to this sort of thing, but I did get another point of view from it. The guy genuinely believes in what he’s doing, it does keep families together and the whole point is to make it temporary and move them on out when they’re back on their feet. In a way, I was impressed (don’t shoot me). I was surprised to learn that, apart from Rameau’s program, Miami does have quite an organization in place to help relieve homelessness and has been very successful at it. The guy who heads up the legitimate organization was not happy with Rameau, since he’s essentially breaking the law. But he doesn’t have the room in his shelters to keep families together and Rameau is able to do that.
I get it about breaking the law. OTOH, why ride the butts of the poor and homeless for breaking the law when there were all these rabid banks, brokers, etc. who committed fraud and worse?
No, Palmy’s not going all lib on you, I do believe in the rule of law, but I’m quickly developing contempt for those entities that blat on and on about the rule of law and bend it or break it themselves.
No palmy you are not going lib…..Its just a reasonable rational temporary solution to an existing problem
Something we desperately need in America, people that have the guts to think outside of the box. But we spent a generation Dumbing Down our country, so this type of thinking is considered Radical…hence breaking the law.
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No, Palmy’s not going all lib on you,
Palmy, the evidence of your “going all lib” is not what you posted about your reaction to that show, but the fact that you would even tune in to that stinking, lying, perverted show, which ALWAYS ignores the interests of the consumer and the taxpayer in favor of the morally superior (?) unionized worker, criminal, or welfare recipient. If I’m ever accused of murder, the victim will be Bill Moyers. (I know, I know, he’s not on that show any more.)
az lender, I shouldn’t have to explain myself, but I will. I’m not particularly a NOW fan, nor am I a fan of Bill Moyers. I will, on occasion, watch the shows if they are dealing with a subject in which I am interested. I do believe in considering all points of view and then making my own opinion or drawing my own conclusions. Moyers has had some guests, like Kevin Phillips and William Greider, who I do respect. Maria Jinojosa (whatever the spelling is) tends to rub me the wrong way, for sure. And I rather loathe her slant on illegal immigration. But that doesn’t mean I’m going to close my mind. I learned something last night about Miami’s care of the homeless that I didn’t know and that was worth it to me.
I do understand and agree with you about the morally superior attitude you are referring to. It does get to me.
You’re not going all lib on us, Palmy.
It’s just that after decades of the banking cartel convincing us — even forcing us — to live deeply indebted, it’s nice to see a force rise up against it.
Don’t get me wrong, I believe in lending and borrowing, but mostly for the right reasons — self-liquidating debt that leads to productive endeavours (starting, expanding, or improving businesses…or when used for emergency purposes like medical help when needed).
The way banks work with them taking depositors’ money and then leveraging it up, so that they make 35%+ returns while paying us 1% (then taking taxpayers’ money to cover their losses when they happen) makes me think a revolution is due.
CA renter, I’ve actually considered squatting myself and attempting to take a property under Florida’s adverse possession laws. But you have to hold on for 7 years and the odds on achieving that are slim. However, if a good opportunity presented itself, I wouldn’t hesitate to take it. As long as there is access to the property and it isn’t breaking and entering, it’s not entirely illegal to attempt it. Pay the utilities and taxes, keep the property up and if no one moves against you, at the end of 7 years, you can file for a deed.
Money is everything to you? You consider (even if metaphorically) murdering Bill Moyers over it, of all people? Twisted, I say.
Obviously I’m not really going to murder Moyers! …but I do despise him. He consistently ignores the interests of consumers and taxpayers and is basically anti-market.
“in favor of the morally superior (?) unionized worker, ”
az-lender.
well now, that isn’t what I know of unionized workers, in fact I see and have many examples of the exact opposite.
Rabid treatment by mgmnt/corp to those who are not of the uber wealth, the superiority is constant and prominent in any and all treatments of labor. Why don’t we all just work for free just so ‘you’ guys can have all the money and the rest of us can live on grass,weeds, and crumbs. Yup. That is how it comes across, all the time, here and elsewhere nationally.
Nice going . I guess the idea of listening to the “other side of the story” is unacceptable for to many folk.
I’m always amazed by younger people who think Bill Moyers is an objective journalist. They simply don’t know his history.
Bill Moyers was Lyndon Johnson’s press secretary, and was handed the job of selling the “great society” plan to the American people.
“I’m quickly developing contempt for those entities that blat on and on about the rule of law and bend it or break it themselves.”
The entire country has had enough of the harping and preaching on “the rule of law”, “family values” and “states rights” as those who are most vocal about that stuff are the first to violate.
And like the incessant drumbeat of the need for higher taxes, coming from an administration full of tax cheats…
Which is different from the failed borrow and spend bankruptcy policy of the GOP?
Next thing you’ll tell me is that paying interest to banks is a good thing…
+1
I don’t believe in any of that shit. It just trashes the place, and blah, etc. Work for it.
I’ve been throwing away my money on rent for the last 2.5 years. during this time I’ve watched housing drop 15 to 20% in the towns I’m interested in in NJ. Now the cheapest 3 bedrooms are within range of someone earning median income. I’m hoping in another year prices will have dropped enough so we can buy a house for roughly what it would cost to rent. (strictly on a monthly payment basis with a 30 year fixed).
I’ve seen houses in fancy towns list for 20% below what they sold for at the peak, and that is after they were renovated. I’m also seeing houses listing for what they sold for in 2003/4.
Our rent is roughly 1k a month cheaper than buying a similar house. We’ve been using the difference to pay off a car loan 3 years early, save for college fund, and have a bit of fun.
I think millions of people who bought houses in North Jersey after 2003 are finding out they don’t own a house, the house owns them.
I’m a very happy renter.
Congratulations (honestly) !
az,
We’ve gone from a 2 bedroom townhouse to a 3bdrm rental sfh (rent was the same) Our next move will be to a town we like better, with nicer housing and lower rents. I’m learning to enjoy moving. If we had bought a house as soon as we moved to his area we would be underwater in a lousy, rundown cape. Now for 1k we can move to a town we really like, lower our expenses, and have a higher quality of life.
Moving is easier when young.
Glad to see you get the best of things!
Agree with your summary.
Getting tired of packing, and unpacking only to find broken stuff.
Most stuff isn’t that priceless any longer.
The same can be said for dawg owners sad to see grown people out in a blizzard at 6 am walking their precious poochie.
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they don’t own a house, the house owns them.
Funny you say that. About a month ago it POURING rain. Going from the car to my apartment (yes a rental) saw two guys each walking a dog. In one case the dog had no clue it was raining. Taking his good time sniffing, sniffing and sniffing, not even close to to doing his buiness. In the other case the dog seemed to be enjoying the rain imensely. Just looking around like wow this rain is great. BOTH guys looked like the most miserable people on earth.
I would rather have a dog than a cat. At least a dog can help defend something. And a dog loves you no matter what…
Your dog only pretends to love you. Dogs are pack animals, and see you as their leader, so it’s completely to their advantage to show affection toward you. Cats are far more independent creatures, so when they show affection (which they do–just in more subtle ways), it’s genuine. There was an interesting article in The Atlantic a couple of years ago about this.
Not that dogs aren’t great pets–I’ve had both cats and dogs over the years (though for the last 15 years just cats). And you’re right about the defense thing–dogs will usually stick up for you, while your cat will probably hide under the bed. (Though that’s not strictly true either–I had a cat who would challenge almost anybody coming into the house).
Walking a dog? Huh?
Our pups rule! They come and go as they please, same with the cats. Dog door and lots of acreage,
river frontage, trees everywhere, what more could
they want?
They have a home, safety, three meals a day, free medical, weak work rules, free vacations,
great retirement benefits…what’s wrong with this?
Cant do all that is NYC…it amazes me how many people live on a 5-6th floor walk up (no elevators) and have dawgs…
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what’s wrong with this?
Can I come live with you as a dog, Rancher? That sounds like a sweet deal!
“There is really no quick fix for the upside-down home, but if you are considering a short sale, then get the paperwork 100% complete before you send it. Otherwise, the process is delayed by weeks. That was our experience and we were lucky to have the buyer stick it out with us; we would have had to go into foreclosure otherwise.”
What are the advantages of a short sale vs. foreclosure? Either way, your credit takes a hit, doesn’t it? And aren’t you liable for the difference in sale price vs the outstanding mortgage amount? Or does that depend upon the state. I don’t know, from what I’ve been reading, it seems like a short sale is more of a losing proposition.
Yes, I second Ben’s thanks to those who agreed to tell their stories. Pretty brave when you consider we here at the HBB can get a little rough sometimes.
No, you are not liable for the difference…that’s what makes it a “short” sale. If you make up the difference, it’s NOT a short sale: the bank was made whole.
The bank CAN ask you for a promissory note covering the difference, but as we’ve discussed here a few times, there’s no point in signing such a note; just let ‘em foreclose if they won’t go for the clean short sale.
A short sale and a foreclosure are treated equally by the credit reporting agencies. A short sale can be better IF the seller cntinues to make their payments on time until the short sale closes. This way there are no lates on their credit. I have seen a credit report where the short seller only took a 50-70 pt hit on their credit after a short sale, but they continued making full payments on time until the sale was completed. If the seller stops making payments the hit to their credit will be identicle to that of a foreclosure. I have posted before about some realtors and their lack of understanding of the impact of a shortsale in terms of credit, and it makes me so mad that many of them do not do their research and give completely inaccurate information to their clients. The information is out there and readily available it just takes a bit of research. There are some realtors out there that do their research, but those are the good ones, and unfortunately in my experience, few and far between. Half of them do not even understand how property taxes work for a regular sale let alone a short sale or foreclosure where the previous sale was for more then the current sale. THeir lack of interest in educating themselves in their field of supposed “expertise” is mind boggling. I have tried to educate a few of them, and was so disgusted when I was told that they could not be bothered with that information, they just want to focus on sales?!?!? HUH? Needless to say I am very selective with the realtors I will work with, and do a full interview at our first meeting to determine if we will be a good match or not.
LOL, I guess Jack McCabe must have been a little startled yesterday when some of us jumped to the conclusion that he would be a guest blogger.
But you know, Jack, if you’re reading, you might want to consider it.
I would love his take on Florida.
I can’t tell if we’ll lead the country out of this, or get blasted to the Stone Ages. I have hope that old Florida is just around the corner. The story of the samurai-sword-sex-offending-mortgage-scamming couple moving to Ohio is a fabulous sign.
I owned a condo in Pensacola that cost me 71K in 2007. Unfortunately, I made the mistake of paying cash. What a disaster! Due to special assessments, the carrying costs, such as HOA dues, special assessments, taxes and insurance were close to 10K a year. I moved to Washington state, and tried to rent the place out through a property management company, but that was a disaster too.
So I made the property manager an offer she couldn’t refuse, and sold her the place for 30K, agreeing to finance the sale myself.
Despite the loss on the property and the fact that I had to do seller financing, I am happier than you can imagine now that the condo albatross is no longer hanging around my neck.
The only workable solution to underwater real estate, whether mortgaged or owned outright, is to liquidate the problem for whatever you can get, minimize the financial damage to yourself, and MOVE ON WITH YOUR LIFE.
It is utter insanity to encourage people to bankrupt themselves holding onto property that has plunged in value. For the government to promote that kind of policy makes the government itself a criminal enterprise.
I am now a happy renter in Vancouver, WA.
I hope everyone on this blog remembers that a condo is a liability, not an asset or an ‘investment.”
The key is HOA dues.
They could be good if the costs “very low.” Or they could be bad, where the amount to pay goes up regularly.
In proper form, the purpose of an HOA is to ensure community standards to keep the value high.
If you find a place with low HOA dues and high standards kept, it’s a gem.
HOAs are one reason why I think the amount of money you buy a condo or SFH should be no more than 1/6 of your net worth. The remaining 5/6 should be invested in various assets such as precious metal coins, T-bills, municipal bonds, stock mutual funds, and individual stocks.
Out here in California the rule of dumb (not “thumb”) is: House rich and savings poor.
What’s critical with HOAs is not just the monthly due amount, but the Reserves. Developers typically squeek through the lowest HOA due calculatons on the DRE report, yet because the Association is responsible for common areas such as perimeter fences and roadways, if you don’t have real-world reserves built up for full replacement cost, than that’s when you get hit with horrible special assessments. I’m lucky that our HOA has frugal, yet prudent board members. They increased our dues by $5/mo. this year which caused quite an outcry but by biting the bullet we went from negative 50% reserves to about negative 20% reserves in one year. Our project is now 10 years old, so replacement of common area items are on the horizon.
It’s odd that a HOA would be responsible for roadways.
My sub deeded the roads and sidewalks to the county roads department (ACHD Ada county highway district), who are on the hook for maintenance costs.
Our HOA dues are $250 per year (year, not month). The developer handed over responsibility to the homeowners in 2007 and so far so good. We’ve got reserves close to a year’s dues. I’d guess we spend 60% of the annual dues on the landscape maintenance contractor. We pay about 10% to the irrigation district and for pump operation & maint., for which we get all the water we care to use for the yard - a hell of a deal for $25/year per household. I’ll bet anyone in the SW would stand in line for the chance to get water so cheap.
Condos will be a disaster in the coming years. The condo I mortgaged in Rochester from 2003-2005 had HOA dues that went from $105 up to $230 at the time of sale. That was damn near 30% of my monthly nut. The worst part was that it was a communal heating system via water pipes. The people on the ground floor were freezing while the people on the third floor left their windows open.
That was a hard thing to wrap my mind around paying for.
Yes Salad, another great point. I learned that the roof had two layers on shingles, and in the time of my occupancy, state law changed from 3 being o.k., back down to 2, meaning that the entire roof would need to be replaced. The matter was never officially discussed so I did not disclose that to the buyer. There were not enough in the reserves to cover that.
It helps to know the maintenance guy.
“Out here in California the rule of dumb (not “thumb”) is: House rich and savings poor.”
Another rule of the dumb is: Land rich, cash poor.
“The only workable solution to underwater real estate, whether mortgaged or owned outright, is to liquidate the problem for whatever you can get, minimize the financial damage to yourself, and MOVE ON WITH YOUR LIFE.”
Excellent advice. The only part I don’t understand is how someone can be underwater if they own outright (no debt at all).
But, yes, I see many people who just LOVE their heavily mortgaged homes. Look, folks, it’s a building…a THING. It can never love you back. Get some perspective.
Words of Wisdom, for sure.
“Out here in California the rule of dumb (not “thumb”) is: House rich and savings poor.”
So what happens when all those FB’s realize they’re actually house poor (underwater) AND have no savings.
Yeah… lifechanging stories and I’m sure they all are quite nice people but the common thread weaving through these folks lives and everyone in this country is this false idea that everyone is all of a sudden being frugal and saving money. Not one of those folks embraced frugality and limited consumption until they basically had a revolver to their head and were forced to. Call me overly skeptical or whatever but when the next bubble inflates, I’ll be there $hitting all over it and taking heat for being a stick in the mud……. and laughing and enjoying the vindication as it collapses just like have during this bubble.
This new founded cost conciousness is BS. I’ll wager those mentioned in the above commentary will head to the slaughterhouse all over again.
I’ll second that.. (unfortunately)..
“We were paying an extra $700.00 a month in hopes that we would get a loan modification. We wasted a year and a half spending that extra money, and that’s one of the reasons we’re in the debt we’re in now.”
I’ve read stories like this before. The banks know darn well that the vast majority of borrowers who contact them about a loan modification will default within a few months no matter what measures are employed to salvage the situation. Their only objective in pretending to “modify” a loan is to suck out the last drop of blood.
As a taxpayer / Citi sharholder among others thanks to TARP, sucking out as much blood as possible is probably a good idea.
Renting = Happiness
This thread came at a great time… just when I needed some fuel for my bubble-sit. My wife is out of town, but I will have her read this when she gets back. With a toddler, and a baby on the way, we are antsy to drive stakes.
Thankfully I am too tied up with my masters, and wifers being pregnant, to spend too much time with the nonsense. We actually looked at some neighborhoods on Father’s day, of all things. I admit to being obsessed with housing, but it dovetails with nearly everything else I am involved with in education (funding, demographics, home values, student achievement, etc.). Also, in another life I would have been an urban planner — it’s just something I am interested in, and I seem to be more spatially sensitive than the Average Joe.
I just hope at the end of all this, housing is cheap enough that when my littleman is in college, he can be in a band and rock out at a house party without the cops showing up. More than my own home, I just want a return to sanity (Stop the insanity!). Not every neighborhood needs to be Million Dollar Condos!
Ben, as always, my sincere thanks. I’ll hit you up with more cheddar soon. And like Palmy, I can’t believe I’ve been here for years. Well done!
Muggy:
I wish you could see what i see, how music over the last 15 years have mad a profoundly negative impact on student achievements.
Compare Language skills, you remember we had penmanship classes, we had to write in lower case between the dotted lines on yellow paper. Or Civics/American History was a requirement to graduate.
Teachers did not tolerate swearing even in the hallways
I really think this has done far more damage then you will admit to.
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I am involved with in education (funding, demographics, home values, student achievement, etc.
Hey DJ, this will end up going way beyond the scope of this blog. Let’s just respectfully disagree for now. We can arm wrestle over a pint next time I’m in NYC.
cool………we always have a place to crash for a HBB’er…
I still can’t believe people talk about building equity when they buy a house. Where I live it’s still cheaper (by a lot) to rent than buy. I view making mtg payments as paying down debt, not building equity. I won’t count my future house as equity until I sell it and have a gain, if any, or at least the return of my downpayment and whatever principle I’ve paid down in my hands. But then the house wouldn’t me mine anymore, so by my way of thinking there would never be equity in the house, just a shrinking outstanding loan amount.
I know people count equity as the difference between the mtg amount and what the house is worth. But look at the carnage that thinking has caused to individuals, communities, and countries.
For me a house is a place to live and be able to fix a portion of my cost of living.
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Asking rents have been driven up by landlords’ HELOC obligations, among other things. I consider them often to be at ridiculous levels, for what is offered.
Examples are everywhere.
Thanks for sharing. I enjoyed reading the excellent posts from Miser and others.
Miser, those are great stories from the front line.
I really really wish the MSM would abandon the meme of “poor poor underwater homeowners who need our help” and examine the reality: many of these folks not only cannot be helped, but would be far better off if they simply walked away. And they would be better off not only financially (by stopping the hemorrhaging of cash), but also emotionally (by no longer having the stress of trying to save their house), quality of life (better accommodations for less), in terms of mobility (able to move to a better job if necessary), etc etc.
The MSM is really doing a lot of people a huge disservice with their current slant.
Miser, out of curiousity: was this independent reporting on your part? Just curious whether these are first-hand sources, or where you got these stories and quotes.
Thanks much for your guest blogging!
Just as a point of information, I just renewed my lease at a 20% discount. I figure it is costing me about half what it would be to ‘own’ the property. When I first moved in back in 2007, we considered buying, but I felt the market was overheated. They wanted $580,000.
NOW the property is worth about $330,000. In the past two years, the landlord has had to replace the A/C- $4000, remarcite the pool - $3000, new disshwasher -$400, new toilets - $400, and now has to retile the entire house - $6000. They will also need to replace the roof soon at about $35-40k. I told the landlord either take it or leave it, as there are about 2 dozen other places available.
They keep asking me if I want to lease/option to buy, and I just laugh. I estimate that had I been dumb enough to buy at the top, I would have lost about $250,000 in the price plus two years of paying about $4000 a month in mortgage/taxes/insurance plus any down payment.
So, to summarize had I bought in 2007, I would have lost
$30000 down payment
$80,000 in payments ( as about 99% would have gone to interest)
$250,000 in depreciation
$13,800 in repairs/upkeep
$(50,000 in rent)
$323,800 total
No to mention the costs of buying and selling.
Of course this does not reflect things like the tax writeoff, but I have to assume others are in similar situations. I cannot see how it makes any sense even at this time to buy. The numbers don’t add up. I can rent a 5 bedroom, 3 bath 3000sq ft house with a pool for $2000 a month. Prices have to fall another 15-20% for it to make sense to buy.