Musing on the housing meltdown, or why I'm not currently sinking

[professionalhenchman]

Reading one of the many articles on what happened to bring us to the current Wall Street crisis, I was reminded of what happened when Sarah and I went looking to buy a house back in 2005, when I was left some money from my Grandmother's death to be used towards a down payment on a house.  The first mortgage broker we talked to told us words to the effect of "We'll loan you whatever amount of money you think you can afford to pay back."  This prompted us to politely take our leave, and run far away, to find one who actually insisted on looking at what we were making so they could tell us what we could afford.  As a result, we ended up not buying because they decided that we actually couldn't qualify for anything.  That's how we dodged the bullet that's hit so many people, and I find myself wondering just how many of the people out there didn't know enough about managing their money to run away from lenders like that first one we dealt with and so got into trouble.

Comments

[dancingguy.livejournal.com]

Lots of them.

More bought houses using low initial payments, on the assumption that they could "flip" the house before their payments went up, and keep the "free monrey" they'd "made".

[spam42.livejournal.com]

The key piece is that housing prices always* go up.. Homebuyers, real estate agents, and lenders all believed that housing prices would continue to increase. If that were true, then the smart thing to do is to buy as large a house as you possibly can with whatever loan offers the lowest introductory payment. You live there for a few years, paying less than it would cost to rent an equivalent house, and then sell it before your loan resets. You got to live cheaply and then pocket a bunch of money at the end of it, and then do it all again.

I'm waiting until the local market (San Mateo) reaches rental equivalence before I even consider buying property.

* not always

[serendipity17.livejournal.com]

Bubble in Action: On Zillow.com, search for Red Top Road in Fairfield. At the south end of the whole neighborhood, there are home sites graded/unbuilt. Actually, there's several blocks of unbuilt bare ground. There's a whole slew of bank-owned 4bd/3ba for under 350K.

I think you two made a wise choice.

[loupyone.livejournal.com]

i'm rather scared to know what my house is actually worth now. I'm pretty sure I got in early enough to still be profitable, but I know I've lost a lot of "value."

[satyrlovesong.livejournal.com]

*nods* Yeah, mine has lost about $200,000. I'm not yet upside down I don't think, but it's close and I no longer have any financial cushion. I keep reminding myself why I bought the land in Oregon, which is paid off. If all hell breaks loose, we can all drive north and found a commune.