Last August I did a post called Have People Completely Taken Leave of Their Senses? It was about the housing bubble (which at that point most people still hadn’t even heard about).
Now you can’t turn on the TV, radio or pick up a magazine or newspaper without hearing about it.
May I give you a few examples? (Update: Links to pictures now missing and I didn’t save screenshots.)
Perhaps you would like to consider this charming cottage in Santa Barbara, CA… This can be yours for ONLY $995,000. And it is on a very generous (?!?!?!) 0.18 acres. And don’t forget about the fresh paint!
Or this one also in Santa Barbara… At $1,395,000 your monthly payments will be ONLY $6,605/month (if you can actually come up with 20% down which almost no one does any longer). People, this house is almost the same age and size as our house. I don’t care where you put that house. There is NO WAY that house is even worth 30% of that!
Or how about this one in Santa Monica, CA which is David’s favorite… What a steal at $1,499,000 which translates into $7,580/month (again, with 20% down). YOU’VE GOT TO BE KIDDING ME!!! In a decent part of town around here that house would go for around $110,000.
WHAT ARE PEOPLE THINKING???!!!???!!!
David and I had an interesting experience a few weekends ago that illustrated how crazy and out of whack things are. And we live in the Midwest, conservative West Michigan, Flyover Country, U.S.A. Even here you can see the craziness, but on a much, much smaller scale.
We went to a few open houses one day. One house we went in more out of curiosity was a brand new house in a new, lovely development. It was more than we would spend, but we were curious. The house was very nice and I would guess was probably overpriced by only 5-10%. Then we went to look at another house in a nice older neighborhood somewhat near where we live. This house was built in the 1920’s and was a little larger than the new house we had looked at. The first thing we were told by the VERY anxious realtor when we walked in was that they had just reduced the house again that day to X which was a $20k overall reduction and that the sellers were VERY ANXIOUS and would consider ANY OFFER because they had already bought.
That meant that this older house listed at just $25k less than the new house. What a joke! There was not one inch of that older house that didn’t need work. Everything needed updating (except the new light fixture in the formal dining room which was very pretty). David and I have renovated an older house and I KNOW how much work and $$$ it takes. After we left I said, do you realize you could spend $25k more and get a BRAND NEW HOUSE and do none of the work? That older house needs at least $25k of work on it. I wouldn’t even consider that older house unless they knocked another $50k off it. (And even then I wouldn’t consider it because the thought of doing all that work is depressing!)
I also found it interesting how desperate people are getting because there are an unbelievable number of people who have already bought a house without selling their first house. Our realtor told us that the majority of the houses he shows are empty because the people have already bought another house. Can you imagine making two house payments for a year or more? A lot of these houses have been on the market quite awhile. The sellers won’t lower the price because they NEED their selling price in order to cover their new house they have overextended themselves on. And this is just West Michigan where the economy isn’t all that bad (yet). The suburbs around Detroit are much worse.
So why am I writing all this? Because I know a lot of people don’t follow financial news. A lot of people think that they aren’t planning on buying or selling a house so this doesn’t affect them. And maybe it won’t. But consider that your friends, family members, church members, etc. are buying houses with zero down on adjustable rate mortgages. When their mortgages reset, their payments will increase by hundreds if not thousands of dollars a month. How many people can afford that kind of an increase in their mortgage payments? And the mortgage may reset higher more than once! What will they do when their house is no longer worth what they owe on it and they can’t afford the higher payments? There won’t be any equity left to take out of it. What then?
I’m no financial guru, but I care about the people who read my blog. You know, I could be completely wrong in sounding the alarm and saying “something has to give and it is going to be ugly”. It will be great if I’m just overly cautious and this all plays out beautifully. But I can sleep at night knowing that the people who came to my blog heard about what was going on and had time to consider the possible ramifications in their own lives.
All in all, David and I have decided that our renovated house with our (relatively) dinky mortgage payment will suit us just fine for at least another year. God graciously gave me a solution to our nursery/office problem so we can make it work! We’ve been looking since last summer, before we even knew we would be having a child. But the more we look and read we realize that staying where we are for awhile could be the best thing. In fact, we’re guessing in another year or two or three there could really be some incredible deals out there on some nice houses…
Just my two cents for what it’s worth and for you to discuss around the dinner table and Bible study this week. 🙂
I have a friend that bought a condo in Silicon Valley. 924 sq.ft. $318,000 (2 years ago). And it was that low because it needed so much work…
What I have found is that the killer inflating factor on houses for sale is not that the owners have already contracted another house–but that the owners have gone deep into a second mortgage debt on the current house. These sham appraisals done by questionable mortage groups make homeowners think their house is worth far, far more than it might realistically get on the open market. Because the owners are now tied to the second mortgage, they are unable to drop the selling price or negotiate with a ready buyer. Many must pay money out of pocket in order to sell their home. To me this practice verges on modern day usury.
The houseing market in our area has gone nutso as well. A house down the street that is smaller than ours and has a smaller garage listed for more than twice what we paid for ours 5 years ago. We couldn’t afford to buy a bigger house in our town – even in getting more than twice what we paid. We are at the low end of the “nice” homes. It’s unbelievable, as you say. So we’re going to “add on” instead, probably next year. More money in the bank anyway!
I agree that the housing market is insane. We’ve lived in our house for 8 years and the market value has more than doubled what we paid for it. My advice to anyone considering buying a house is 1)buy small and upgrade later, 2) stay within the recommended goal of your housing payment be only 30% of your income, 3)Don’t get an adjustable rate mortgage, but a fixed rate – the rates are good now, by comparison of several years ago, and 4)Do whatever you can to pay off your mortgage as quickly as possible. And something to consider if you are refinancing… most mortgage companies do not tell you that after refinancing, you start at payment #1 again which means 90% of your payment goes towards interest and 10% to prinicple (or less). Ask if they can start you at payment #25 or whatever month you are on when you refi. so that you can have the same percentage of your payment going towards principle. We too would like to move but think it is more wise to stay where we are at and make it work. And the bottom line is that home ownership is not all that it is cracked up to be. Besides mortgages, you have the cost of appliances, repairs, yard work, etc. that all add up. If you can’t afford a house, then be smart and rent and save as much as you can comfortably until you can afford a house. It is not worth going into debt over your head for!
I’m with you. 🙂
So what kind of solution did you come to about the office/nursery dilemma? I’m interested because our house is definitely on the small side for our family, but we own it (I mean, really own it) and aren’t interested in going into debt. And I don’t think we could upgrade around here without significant debt. So we just think. And I’m always on the lookout for creative ideas about using space.
Thanks, Susan (the housing market is definitely a LITTLE crazy around here, but not totally out of sight…yet)
Okay, we live in SanDiego and the housing market stinks here. We rent a 575 sq ft one bedroom apartment that goes for $695/month. We just found our we are pregnant with our third child, due in December and we would really like to get a place of our own that we own. Most of the houses we have looked at are between 400K and 500K (in the cheapest part of SanDiego county) and the condos are between 250K and 350K for two to three bedrooms.
What is a person to do? We can’t stay where we are. I want to live somewhere where the neighbors aren’t blowing cigarette smoke into our windows everyday. I want my kids to grow up without respitory problems that were caused by other people’s poor choices (yes this is actually the case, my oldest, born and lived the first 1 1/2 years of his life without second hand smoke-fine, my second son, born in this complex, exposed to second hand smoke every day, already showing asthmatic signs at one year of age and has had pneumonia two times this winter already.)
So I ask again, what is a person to do? ….Anyone?
Poor Kimbrah! Decide on your priorities with God first and ask Him to help take care of the impossibilities (e.g. finding a job in a cheaper location).
We live in a little two bedroom place ourselves (Sometimes I refer to it as our ‘corner of the rooftop’). Over the winter we gave notice to our landlady and searched diligently for a 3 b.room apartment/house nearer dh’s work. Nothing. We would have been digging ourselves a hole of debt with not even equity to show for it. So for now we are staying put (with baby sleeping next to my bed- which is fine, mostly…) until we can go back to the States in the fall to raise more support.
It’s not going to be easy or fun dragging two toddlers around the country for half a year or begging churches to support us, but it is far better than going into debt with no forseeable way out.
Kimbrah,
I will keep you in my prayers! May God provide the housing and the job that will be best for your family. If it was me, I would consider finding a job in an area with less expensive housing, but God can also provide a job that will cover your housing expenses where you live. My husband and I feel very fortunate that God has met our housing needs where ever we have lived. And we have lived in both a small town and a big city. Our God is a big God and can meet all your needs!
Susan – My office will become the baby’s room and David and I are going to share his office. David’s father (who is a very talented woodworker) is going to make us a desk that will span the entire length of one wall. We’ll have bookcases above it and two work stations. Since we are both on laptops we don’t techinically need a ton of space. It will be less than perfect, but it should work for at least a while.
Kimbrah – I’ll be honest. If I were in your place I would have a very hard time being content. That is a challenging situation you are in and San Diego is one of the worst areas for overinflated housing prices in the country. Is there any way your husband can look for work elsewhere? Almost anywhere else in the country is going to be cheaper compared to where you are now. The Midwest/Central Plains in particular would be more reasonable. My heart goes out to you!
I really appreciate everyone’s concern and prayers. We really don’t have the option of moving to a different part of the country right now. My husband is finishing school (while working) and all of our family is in this area. Right now we are working on my husband getting a better job that he likes more (he would love to do web design and there are several promising positions open in our area). Plus we have a great pediatrician, a great allergist, a great chiropractor, and a great birth center to deliver our baby in (my second was born there and I loved every minute of it!) with great midwives. We have a great Body of believers to fellowship with and good friends who are in the same time of life as us. We feel very sure that God called us to be here in SanDiego and we also feel very sure that He will provide for us, maybe not in the way we would expect, but He will meet our NEEDS. I’m sorry I kind of went off in my previous comment. I just get really frustrated waiting for God to work sometimes. I really do need to go back and read that contentment post again Sally. I really did print it out and it is in my diaper bag so I can read it whenever the need hits.
I really do appreciate all the prayers.
I love that third house too! They don’t even have interior pictures! And the part I love the best is the realtor’s description which says “laundry in garage.” Oh my!! This is totally outrageous. There’s nothing mor for me to say, everyone else has already made such excellent points!!