My daughter has been in swim lessons for a few weeks. Normally the routine is that my wife and daughter carpool with the neighbors (who have a daughter the same age) and I sit at home taking up space on the couch or surfing the web. For the last couple lessons, the neighbors were out of town and I didn’t want my wife to have to go alone so I tagged along.
On Monday we arrived at the swimming pool (Indoor). I wouldn’t even have to say that if you knew I lived in the Pacific Northwest. Anyway, we got there and hadn’t been sitting for more than a couple minutes when a nice lady sat down next to us. Her son was in the class and I have to say, she was quite a chatty lady. Somehow I always manage to steer the conversation towards personal finance or related subjects. Well, it didn’t take much before the woman started spilling her guts about the precarious situation she has found herself in. She and her husband have two kids ages 3 and 5. They purchased a brand new townhouse last year at the peak of the market. Now they are realizing the area that they bought in to doesn’t have good schools, in fact it actually has pretty miserable schools, and she would love to move. She’d also like to live in a house, although I’m not quite sure why they didn’t realize that before they bought the townhouse. The reality for them, though, is that they can’t move. The builder is now selling brand new units just like theirs for $40K less than they spent. On top of that, it turns out that the builder passed on the sewer connection fees of over $4,000 to each unit owner and the bill just came in the mail. Needless to say, she’s feeling trapped and not very happy. She’s coming to the realization that her only option is to go back to work. While she feels that’s an option that she has in her back pocket I have to wonder whether it really is. She mentioned that her background is in montessori teaching. To my knowledge, the pay scale for that type of job isn’t very good so the daycare costs could easily knock out the benefit of doing that.
This woman was the first person that I’ve talked to in our area that is actually upside down in her house. Listening to her, I found myself feeling really bad for her. The strain in her voice and desperation in her eyes told me that this was causing them a lot of hardship. All that being said, they aren’t at risk of losing their home. I can only imagine how much more stressful it would be to be facing bills you can’t afford to pay.
Are you in a position like this woman, or do you know someone who is? If so, what part of the country are you in? While we’ve been pretty sheltered from the imploding real estate market in the rest of the country, it’s pretty clear our number is also up. I guess it’s time to hunker down a bit.
While we are not in that situation I have to agree that the Seattle area is feeling a bit of the softening. We just moved here (yup) and are renting until our future has more clarity. While we rent we are watching houses near us and have seen a $700K house drop to $600K (not that we could afford that) and another house drop $50K, in a good neighborhood with good schools.
We are not upside down on a loan, but the houses here are not selling. I have had two friends recently who have tried to sell their homes and ended up sitting on them for almost a year.
It is definitely a tough time in our area (IN) for the housing market…
I’ve been watching my neighborhood very closely– it doesn’t seem like much is selling but a few sales seem to indicate that prices have at least held steady since I bought. I’m definitely not upside down on my mortgage, since I put 20% down, but I do worry about the number of not-yet-completed condos in the area– there will be plenty of inventory to compete against if I ever try to sell. Fortunately I don’t think I’ll have any reason to move, and even if I did, I think I would rent my place out rather than sell it, as I know the cash flow would work out.
It’s interesting, when I read a story like this I feel really sad for the people involved. I know they didn’t mean to choose the wrong house, and they could have fixed their mistake with much less financial damage had it happened two years ago.
Still, when you look at the economic situation in our country, there has to be a correction.
These are the really hard questions in life. Is a bailout the right thing to do in the long run? Or do we let the chips fall?
My husband works in the real estate, and the thing that’s happening around us is that nothing is selling because no one will lower their prices to match the market.
Hey Hazard, great post (albeit a little depressing). Sadly, I have a feeling that we’ve only seen the tip of the sub-prime iceberg since most of the rate resets are still some time down the road!
By the way, in case you’re interested myself and nine other PF bloggers just started up our own network and would love to have you aboard.
Please shoot me an email if you’re intrigued – contact@masteryourcard.com
Hope to speak to you soon!
Jonathan