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Homeowners Under House Arrest

To write a recent post Do You Have 10 Years to Wait Around for the Housing Recovery, I put on my analytical hat to illustrate the future for Orlando’s real estate market.

Anyone reading the post or studying the accompanying graph — which showed that house prices in the Orlando area are not likely to recover to 2007 levels for 10 years or more — would have been either heartened or devastated.

For optimists, it showed a small light at the end of a dark dark tunnel.

For pessimists (or perhaps realists), only the dark tunnel existed.

In hindsight, I realize the post lacked the human factor.

People who purchased a house in the last 5 years are suffering in many ways — emotionally, financially, spiritually. The real estate market crash has consequences that go deep and strike at the core of who we are as individuals and what the future holds for us.

For many, our illusions have been attacked, our hopes dashed, and our beliefs destroyed. The ground has shifted beneath our feet and thrown us, almost literally, to the ground. A great many of us feel that we’ve been lied to, tricked, bamboozled, misled, conned, and let down ... by our government, our politicians, our financial systems and, perhaps, by our own gullibility.

For many, life goes on as usual. Nothing has changed for them.

For others, everything has changed.

Many who purchased a house between 2004 and 2008 — which applies to over 100,000 Orlandoans — may very well be ...

Trapped in their own homes!

Yes, the very sanctuary they go to at the end of every long day has become a prison.

The reassurance of familiar possessions and comfortable surroundings is gone.

The place where they know who they are has irrevocably altered.

The rooms where they make plans for a better future have darkened walls.

The very abode where they invested their dreams has turned into a trap.

Think about them for a moment and put yourself in their shoes ~~

What if your employer offers you a promotion, but you’d have to relocate to another city? You’re trapped.

What if you’re an empty nester and you want to downscale to a smaller house? You’re trapped.

What if you’re reaching retirement and you want to relocate to an easier lifestyle? You’re trapped.

What if you and your spouse are having problems and you’re considering a divorce? You’re trapped.

What if you previously relocated to another state but now you’ve decided to go back home to friends and family? You’re trapped.

What if you have dreams of pursuing a different career, which requires you to move? You’re trapped.

What if you’re getting married and starting a new life? You’re trapped.

One of America’s greatest promises has been our freedom to live and work wherever we want.

But now much of America is under house arrest, and parole is a long long way off.

* * * * *

JUDY CHAPMAN | Live the life you dream

Residential Sales ∙ Luxury Sales ∙ Short Sales

Koenig & Strey | 1925 Cherry Lane | Northbrook, IL 60062

Judy@ChgoNorthShore.com | Office: 847.749.3811

Up until a year ago, I sold real estate in Orlando FL, explaining why you’ll see many, many posts related to the Orlando real estate market. Now I’m back in ‘Sweet Home Chicago’, selling real estate in the North Shore and West of North Shore Suburbs.

If you’re interested in relocating to Florida, contact me for recommendations of some very fine Realtors^® all over the state. I can also refer you to some of the hardest working Short Sale real estate agents throughout the country.

Posted by Judy Chapman on 07/26/2009 09:27 AM

Comments (110)

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110 Comments on Homeowners Under House Arrest

JUL

2009

This feels like a bad place to be stuck. I had not looked at it from this perspective.

Judy. You understand. I was thinking I was a voice in the wilderness.

For a couple of years now, I've been writing about the harm to the American home owners and the economy when 20,000,000 home owners are "prisoners of their mortgage".

Few seem to understand the harm to the economy, let alone the families trapped in limbo, making payments on a property with half the value of what they paid, making payments on reset mortgages with no money left over for the basic necesities.

The fools on Wall Street and on Capitol Hill who are looking for a quick recovery are whistling in the dark. Sadly, there's nothing they could do if they wanted to help the American home owner, they blew all of our money on the Wall Street gangs and banks.

Recovery?? I give it 5 years of stagnation, they 5 years to solvency, then another 5 year to growth.

You present a strong case to avoid a home purchase in your area.

Judy... this is unfortunately what has become of the inflated pricing in many areas of the country. Any time one could buy a home and sell it for 20K-40K more by the time the contract closed, this is the end result. This is not good for many people across the country as now they are as you say trapped in their homes. I once spoke to a builder in Apopka who had the same floor plan under construction at three different prices due to the stage of the construction. I could not believe this. Also, simply because a home was on a cul-de-sac this was considered premium pricing.... What ?

Yes, so many homeowners here in MI in the same boat! Here's hoping for the best for all of our clients and us!

Betina - Even those of us who bought before the bubble (me!) feel trapped. In a very average market with very average appreciation of say 3%, Orlandoans who purchased more than 5 years ago would be in a very comfortable position should they decide to move. Now, they have to think, and think hard.

Hooray Judy for telling it like it us.

Linda Metallo, Re/max Impact, Lockport, Il.

Thank you so much for your post. To often we rage against the machine, get extreme inot the polirical issues of the mortgage meltdown, offer solutions like brilliant economic scholars, and forget about the emotional devastation. Your point about lack of mobility is huge. One of the reasons our economy had been flowing is that the ability to relocate where needed, or where the jobs are is a backbone of American capitalism. As a team that handles shorts sales where job loss, divorce, and medical problems offer sometimes in conjunction, dealing with the human turmoil is hard, but necessary. Thank you also for your honesty. Too many "investment experts" are telling that places like Orlando are no brainer flipping cities with reocvery coming next week. You know your market, and that is evident.

Judy, Regretfully I agree with Lenn. the only difference, I am wont to submit, is we must recognize the volatility of our society. Events happen at warp speed and compress the time needed for resolution and redemption. Take technology for example, preemptive technology gives us new paradigms monthly, I know I am exaggerating a bit here, but standards are fast changing what were established procedures. So be it with the Economy, Cultural Trends, Geopolitical Reality, etc.

Plus sa change... property values will return...but things may be different. Ah, but that's for another conversation.

Keep up your faith in your own abilities, work intelligently, grow, learn, and reinvent yourself, as needed. We can all do that!

Good blog Judy.

Joe Pascal, 5 Star Real Estate, Wilmington, NC

Lenn - Everything you said, ditto. It's such a disservice to speak of the 'bubble homeowners' as a bunch of deadbeats. They weren't the ones who made this mess, but they are the ones who must suffer the consequences!

Roy - Actually now is a great time to buy in Orlando, and the rest of Florida, as well. Who wouldn't want to buy when prices are down 35 - 50% from their highs?

While I don't have a crystal ball, this feels like the end of the crash. Certainly buyers think so. They've been coming out in droves this year. Sales are up over 33% year-to-date, and there seems to be no stop to buyers wanting to get in.

Judy, that's a huge percentage of owners isn't it? While I understand your point, I cringe at the word "trapped" no one is ever trapped. There are always options.

Roland - Those $20.0 to $40.0 price increases were like the tulip craze in Holland or the gas jumps last summer. Pure speculation that worked out for some but trapped others.

Cul de sacs are attractive to buyers depending on the positioning. Sometimes the lots are much bigger than usual and offer more privacy.

Mary - Being there for our clients during one of the most difficult times of their lives is the icing on the cake!

Judy,

Home ownership over the years has developed into a"right" not a privilege that CAN come with our promise of freedom to live and work where we want. There have been many who purchased without the due diligence of thinking through consequences if they lost their job or other situations that life throws our way. Renting is always an option especially if we aren't sure we want to work where we are working and we might want to make a change. Some do like maintenance like having a home painted on the exterior when it is needed and feel that is an upgrade! Owning and maintaining a home is not for sissies. The "American dream" has been touted by many to buy a home and unfortunatley for many it has turned into the "American disaster."

Back in 2005 I remember telling more than a few home sellers that the market was so ridiculously overheated that if they really wanted to sell that now was the time to do it because people were in a speculation frenzy and you could name your own price. I sold a couple of my properties at ridiculous prices as well. (Should have sold most of them.)

Now with the economy the way it is, maybe now is the time to simply walk away. I wouldn't advise anybody to abandon their home and let it get foreclosed, but if they are going to do it now is the time. 3 or 4 years from now, the lenders are going to have looser credit standards than they do now and there will be millions of buyers who simply got into the situation you mentioned above. The lenders will have to come up some creative ways to loan money to these people. So if they walk away now, they will most likely be much better off creditwise than if they get forced to walk away 3 or 4 years from now. Just my take on things.

Colleen - I agree. There are always options. Case in point. One of my clients was offered a big promotion in another city. She left behind a house she'd purchased a little more than a year before. Because the market dropped out from under faster than you can count to 3, she's now left with a $100,000 loss on that house. Her 'option' came with an enormous price no one should have to pay for achieving recognition and excellence in his or her chosen career.

Linda - Appreciated.

Joe Pryor - It always comes down to people -- you, me, the neighbor next door, the close friend or relative. One way or another, we're all paying for this meltdown.

Joe Pascal - I can't tell you how many people I've met who want to leave Orlando -- its hot summers and its hurricanes -- and move to your state! They simply can't, and they're going to have to wait a long, long time.

Dorie - Used to be you'd buy a house and figured that you'd live in it for at least 5 years. Over those 5 years, your house would appreciate on average 3-5% annually. By the time you were ready to move up or out, there'd be enough equity built up that you could pay off the loan and closing costs, and have a sizeable chunk of equity left over to buy another house, or retire, or relocate, or whatever. For too many, that's just not an option anymore.

Rob - Back in 2005 when the market jumped up 25% overnight and kept climbing, I was toying with the idea of selling, renting, and sitting tight. Boy, could I kick myself now.

Rob - Adding to your comment about walking away ... I wouldn't advise it either, but you're right about the necessity to relax lending standards down the line. The real estate market has lost and will continue to lose millions of potential homebuyers, buyers who will eventually recover from their past troubles and be able to qualify for home ownership once more, provided there's a forgiveness factor.

Judy, Your post will surely send chills down the spine of those who had not thought about the predicament they find themselves in. Well done.

I can empathize as I am a bit upside down myself..trapped? No. I have options - none palatable!

While it seems some believe we may be nearing bottom, many economists think we won't fully recover for 5-10 years. That's scary.

Erica - If you take a look at my (boring!) graph via the hyperlink above, you'll see that my prediction is about 10 years before we get back to where we should belong. It's going to be a long row to hoe.

Gary - I can commiserate. While I'm not upside-down, I sure lost a whole lot of market value, even the modest gains my house experienced in pre-bubble years, so I feel trapped as well. If I had to move, I could, but it sure would hurt.

Bill - I think many understand their situations well. It's just too much for them to think about or admit out loud.

I'm more interested in sending chills down the spines of those who think they've dodged the bullet and look down on those who weren't as fortunate. None of us are truly safe.

What a blog and thought, I keep hoping for a silver lining or bright side, like here a Hurricane would jump start the market. That's one heck a note isn't it.

Judy..."if" is only a two-lettered word, so small, but can cause so much heartache.

Hi Judy -- your post is about homeowners that HAVE bought -- not WILL buy. It is well-taken by me, at least. And I understand what you are saying. I appreciate your empathy!

Judy, this is such old news in Texas from decade to decade. We have had many homeowners trapped underwater here for ten years in the 1980's, 1990's and the 2000's when they bought at the peak of a seller's market and it takes ten years to recover their buying price. If you have to move you just have to take a loss at the table. It is interesting that it finally is happening in other areas of the country where to them it is a big surprise. Our issue causing this has always been out of control new homebuilders and too much supply. To me, this story always makes a good case for renting (or somehow buying below market when you start out). My most fun similar story is the stock market. Can you say Nasdaq 5,000 in 1999? Click off ten years now. 2009. Where is the Nasdaq today? Some things take EVEN longer than ten years to recover. Twenty years??

Gary - That's interesting about Texas real estate. I'm originally from Chicago, and when we had real estate downturns, market value went down slightly or just leveled out. And yes, owners just hunkered down but usually for no longer than a year. Also, most homeowners purchased with long-range plans in mind -- usually to settle down and raise families. Here in Orlando, long-range plans can often last 6 months!

New-home construction is a big part of Orlando's problems. Many of the hardest hit subdivisions are the very ones that were the most popular AND overbuilt.

This is not the first time this has happened. Over 20 years ago many areas in this country saw the same thing happen.

Why haven't we learned? That is the question I want to ask everyone?

Very good post Judy. The average homeowner is going to be "under water" on their mortgages for many many years. And as you pointed out life circumstances will eventually put them in a must sell situation.

TLW and I were lucky to be able to sell a few of our properties last year. Well I guess I can't say we were lucky. We had to take money to closing on all of them. BUT it would be a lot worse today. We got out when we could.

By the way, I LOVE that little badge in your side bar. Makes me feel like a proud papa!!!

Sounds like unvarnished indentured servitude.

Judy - Your insight is astute. Eventually, those who are trapped may make a decision to let their homes go.... so they can move on. Excellent article. P.S. I agree with Bryant, your side bar badge is awesome!

Norma - Real estate markets go up and down, but none as up or down as Orlando has been experiencing. Sometimes I wonder if anyone will trust homeownership ever again. But so far this year, nearly 9000 single-family home buyers in Orange and Seminole counties (the counties where I specialize) have put their trust in homeownership!

Bryant & Wendy - Yup. Who among us can say what will happen tomorrow, much less a month or a year from now. Homeowners can't be trapped in their own homes forever. Eventually they will reach that point when they have no choice to but say, "Toodle-oo."

Hi Judy...

Excellent post. Again :)

I had a real comment until I saw BB beat me to the punch :)

TLW...ROAR!

This is one of the best posts I have seen on active rain. It is good to tell the truth

We are lucky here in Akron Ohio as we never had a bubble to burst. Our home values were always one of the best in the country and our annual appreciation was for many years 3-5% annually. You won't get rich but your home values went up steadily. Sure some are under but not nearly as much as some of your neighbors in the rest of the country. We are actually seeing signs of values going back up. I do feel for all of those affected by issues in your post and I am sure many Realtors are in the same boat. Don't look to the dumbarses in DC for any help soon, they have too many rich folks to bail out first.

Certainly many people we speak with feel trapped -- there might be options, but they cannot see them , or the options or even worse -- at any rate, they feel trapped.

Hi Judy -- I think homeowners and prospective buyers will hopefully realize that real estate should be looked at as a long-term investment, not a McDonalds drive through. The same view as a long-term growth stock -- over the short-term of 3-5 years, one could lose their shirt, which is why they recommend dollar cost averaging.

Great post. It reflects how many homeowners feel.

You know some of these people were just as eager as the loan officers, lenders, etc. I often think about whether things would be different if buyers in these inflated markets actually said "NO" instead of yes when it comes to buying homes for well over market value? OK, I know I am dreaming but it takes two to tango (sometimes more) but at some point in our lives we have to say "NO" to things. No more credit cards, no more home equity loans, no more eating out, no more new cars, etc.

Oh well, guess I will wake up now and come back to reality.

You are right. So many innocent people thought they were doing the right thing and are now trapped.

JUL

2009

So, do you advise people to buy homes, or would you tell them to steer clear of homeownership?

What an apt metaphor you've used to describe the plight of not only people in Orlando, but people all over the U.S. - including me. How long shall we all be in this prison? Only God know. Hopefully some will be able to get out sooner rather than much, much later.

Judy-your post certainly puts a human face on the market collapse. Home ownership used to be considered to be a long term purchase- then again so was marriage.

Real Estate is much like the law of Gravity- what goes up will eventually come down- but it also goes in cycles. The people buying now have calculated their timing well and will gain substantial equity over time.

Those who bought at the peak as your post points out so eloquently, "will suffer the slings and arrows of outrageous fortune. or loss thereof. Perhaps utilizing the Capital Losses will ease their pain at closing.

Judy - Finally a post that sums it all up. I will probably be emailing this to some of my clients and sharing with agents in my office. There is a flip side to all this, the art of investing and not putting all our eggs in one basket - I will follow up with a post of my own rather than to take up room here.

Carol - What a lovely compliment you've paid me. Sometimes I get wholly involved in the analystical side of our business. But the short sale stories I keep hearing wrench the soul. Numbers are one thing, but the people behind the numbers tell the real story. We can only try to reduce the numbers as much as possible.

I'll look for your post.

Hey tanks for the post today.

There a lots of people who feel this way.

Patricia Aulson/portsmouth NH

Thanks for the candor. I love it when all the realyors sing the "great time to buy" mantra. Not necessarily so. Not necessarily no.

If you can afford a home, the payment is comfortable, and you want to own and take advantage of the tax breaks and other things that you get when you buy a home, it is always a good time to buy. I bought a home when I could afford it, at the payment we could afford, at a price we felt good with. The markets dropped about 25% and I can't sell it now for what we bought it for. we are prepared to stay, and if we can get the money to add on, we will do that rather than try to buy another home(we're trying to start a family).

Fabulous title! Definitely eye catching. Hope none of your local readers jump off a bridge!

I VOLUNTARILY WEAR AN ANKLE BRACELET.

i had to type farkleberry to make this post. anybody know what a farkleberry is?

Judy, you can substitute Southern California for Orlando and still be right on the money. Until the banks release the "shadow inventory" and the market absorbs them all, we will be trapped.

One thing that will definitely have to happen, is underwriting guidelines will have to reconsider the "scarlet letter" F (foreclosure) when it comes to dealing with sellers who circumstances dictated a short sale. We can't have everyone out of the market for three years.

Great Job

so good to hear some speaking from the reality sode of the fence rather than the token, "NOW is a GREAT time to buy real estate". in many cases, a foreclosure will be long gone from someone's credit before they start to actually see positive equity in their home making regulkar payments.

tina in virginia

Anytime someone buys a home and then needs to sell in the short term, they risk being trapped. Markets where people could sell after a year or two and come out ahead or even are not the historic norm.

Its all in how you focus on it. Its hard not feel trapped in this situation. We can't control all aspects of life, but we can make the best of them.

Wow, this is such a downer for a new agent like me. I know it's bad out there - i wasn't an agent during the good times. Here in Charlotte, NC, it's certainly down, but people aren't trapped - they just won't make as much money as if they sold their homes in 2007.

I hope it's not 10 years!

Judy,

Wow, you nailed it from all of my Florida contacts that picture you paint is reality. It is so unfortunate that your beautiful state has had to experience some of the worst and some of the best over the past 3-5 years. I have a client who has 5 homes in Clear-water Beach that he uses for weekly and monthly rentals. His values have taken a huge hit, not to mention people are not vacationing as much as they were. I have seen his values drop over 45% the past 8 months and his leverage with his loans is not what it once was and he will be lucky to be able to keep his homes. The really bad part is the lenders that have languished in his fortune are the very ones calling him to task now that they can't continue his variety of loans. The very ones they recommended are now being pulled out from under him and threatening to force him to sell at ridiculous prices.

I think we need to expand the blame.. Your market and many others have experienced the bottom due to much greed and a growth scale that would make a 5th grader blush. No one wanted to miss out when the values were going through the roof, so they made it work, and the lenders found programs that the average Realtor didn't even know existed... we all have a stake in what your going through. Fortunately my local prices have not been affected to the extent of entrapment.

Thanks for your delighful take!

I wish your blog will go public and gets picked by the newspapers. . you have put into words easy to understands what million homeowners are feeling today. . absolutely one of the best points heard in probably the last 100 blogs I read in the past.

You are my associate now.

Lots of negativity here today. Happily I am not going to be part of it. In the Myrtle Beach area condos were heavily overbuilt and prices went to the moon. They are now back near where they began for the most part. Detached homes are a different story. In the Myrtle Beach area they have come down a bit but were bought as homes. Retirees also bought along the southeren North Carolina coast and are not effected nearly as bad. Yes, time on the market is longer and in some cases values have dropped. In some areas they have INCREASED. Investment property has taken a huge hit but for the most part homeowners away from the tourist sections are fairing well compared to many places. The economy will turn in time, sadly obama and his administration is going to force it to take much longer than if sanity with them prevailed.

Judy; that is such a good analogy. As a former probation officer turned new real estate agent as well as a homeowner 'underwater' I can definately compute the similarity in my brain. This is an excellent time to 'move on up' unless you have property to sell affording you to do so. A buyer's market? Yes, but either a buyer who has the financial ability or is a first time home buyer without the encumberance.

PS: I don't know what a farkleberry is but I typed cuachilote and I don't know what that is either.

Why do some find it necessary to post their political beliefs in some of these blogs? Can we please get over blame games. This isn't the forum for it.

Judy, good post. There are other groups in the same pot, namely people who bought at a good time, but refinanced and took cash out so that they are actually in the same position as people who bought over the last few years. Another group is people who actually still have some equity in their homes, but not nearly as much as they counted on, to sell and retire, to sell and move, etc.

That's really a catchy title Judy and unfortunately it's right on target. I hadn't thought about it that way before reading your post.

The banks should send all the homeowners underwater some pink underwear like Sheriff Joe Arpaio makes the inmates in "Tent City" wear.

Thoughtful post.. it points out the (ugly) truth. If you purchased your home a few years ago as an investment it was not the best move but if you purchased your home to live in your prospective is a little better.

Would you rather have purchased GM stock or invested in Orlando real estate several years ago?

Judy, what a great post!

We should remember, that we don't have to read, nor respond to blogs which we don't like or don't agree with. Maybe if we had more people realize that this was an issue earlier, it wouldn't have escalated to this size.

Judy,

If the homeowner still has any equity left, it is not as bleak as you say. If I want to downsize, sure, I lose money when I sell my house now. But I make that up on the home that I buy which is also at a discounted value to the last few years. Likewise if I move as long as the areas are comparable. This is gloomier than the real situation.

The folks in a bad way are those without the equity to be able to afford to move. Ten years is a long time. You can always make more money, but you can never get even a single moment back.

I was looking to move up to my first small home from a 2 bedroom condo in S. California in 2004 - 05. The price/value not only seemed too heigh but climbing. In California I remember the affordability ratio was about 10% of the population could afford the medium or average priced home.

It was an absolute no brainer to decide to wait. I am no expert or economist but what goes up must come down and all. Additionally, I saw SUV's, marble, granite and vacations flying off the shelves and people simply living beyond their means. I will grant you that there were very smart people from governments, Wall Street and banking profiting from all of this but there were many Johnnie lunch bucket types that are every bit as much to blame.

I had a paradigm set when I was shopping at $310,000 for a 50 year old tract home in a middle upper neighborhood in North Orange County that I saw skyrocket to well over $500,000 and now back down to under 400,000. I, for one, am glad to see the obvious kick in while I continue to pay down my little condo (soon to be my rental) and build my down payment for that home.

Everyone needs a place to live and if you purchased something you could afford then the value does not matter!

Howard

I couldn't agree more. I have seen several houses in my market lately that the client overpaid when they bought the house and now they are definitely in prison. We have resorted to desparate measures to get their houses sold but what can you do when there isn't any room to move anymore?

I find it interesting that you speak of homeownership in a down market as a trap. We are talking about "HOME"ownership, not "HOUSE"ownership. Hopefully most people buy their homes as a place to live not as an investment to be sold in the short term. Yes there are tax advantages for homeownership and yes there is pride in owning your place of residence. But first and foremost where you live should be your home, a place of refuge and peace.

I can understand if life happens and a sale is needed, but no one should feel any more trapped in a home that has lost value in this market, then they feel trapped in the new car they just purchased and drove off the lot losing value.

I think we need to reconsider how we sell houses and place more emphasis on the home part of ownership for the average family rather then on the investment possibilities.

On the other hand, investors and those who bought homes in order to flip them are definitely trapped in this market. Those were business decisions that didn't pan out. Selling short on a house in that case is the same as selling short on stocks. It may be in their best interest to take the loss and the writeoff instead of waiting 10 years to regain their investment plus a profit.

Just my two cents and maybe a slightly different perspective.

Barbara

Hi Judy~

I really, really do not like the idea of experiencing myself (or others) as VICTIMS trapped in a hopeless situation...I also don't like the idea of having to chew off my own foot to get out of a trap (I can just see Nicholas Cage in the movie, Moonstruck where he threatened to do same) ..Possibly, time for us to get creative... ..the old American Ingenuity MUST still be alive somewhere...

Judy,

Not to darken the dimly lit tunnel but in many markets the construction boom led to shoody built homes.

Now the homeowners are trapped in homes not only worth much less than what they paid but in need of major repairs.

Even if they still have jobs they must choose between fixing the home or paying the mortage.

This situation is all to common in the Arizona, Nevada and Colorado markets right now.

I notice several folks recoiled at your use of the word, "trapped". Trapped is a realistic term. You may get out of a trap but it definitely has holding power and I thought your use was appropriate. Many people in life are trapped in various ways and realization of the import of one's situation is the place to start anything positive, isn't it?

Dave

A very very grim reality...reality being the key word. So very painful for so many including many of us, but like it or not, no matter what side of the equation you are on....not to sound trite, but it is what it is.

I feel sorry for all homeowners who have to work just to live. Overextending yourself has always been a part of the American Dream and now millions of Americans are paying the price for living the dream.

Until you go through it yourself you won't really understand the meaning of the word trapped. There are a lot of ways out and which ever one is best suited for your situation is the one you'll most likely take.

Until this country stops printing money, bailing out the banks and wall street, we are all subject to the most insidious loss to our wealth, inflation. It reduces the value of money a little at a time, unless it's invested in a commodity that goes up with inflation. Remember the Jimmy Carter years. Will home prices go up with inflation? If home prices do increase and you pay off the old mortgage with inflated dollars are you now better off?

So many scenarios to consider. Wouldn't it be great if we had a crystal ball.

Hi Judy, Nice post. Yes it is very sad that these homeowners are prisoners of their mortgages. Things seem to be picking up a bit. thanks for sharing

Judy,

Orlando is one of the spots that Canadians ask about.

Hopefully, the recovery will soon be in motion.

Brian

Very insightful. I often am questioned by Homeowners : "What should I do...?". Many of these individuals CAN afford the ridiculous payment on a house that is DOUBLE what their current house is worth.

The decision to "throw good money after bad" is truly a dilema. Too bad the banks are causing so much of these by their reluctance to cooperate and HORRIBLE attention to Home Retention.

Jeff Burnham- Rosen & CO. West, Las Vegas

People who need to move for employment, health, divorce need to check with a professional property manager about the "joys" of being a landlord. 80% of my incoming residents for the last year have been homeowners elsewhere renting out their current homes. Most who rented on their own the first time around are now asking me for property manager references as their tenants are leaving.

The "prospect" of being held trapped if they purchase a home NOW is groundless unless the home is remote or in a HOA that prevents renting of the units....selecting a home to live in NOW that would be a good investment in 2 to 4 years is keeping the flame under good home sales in the Central Virginia area!!!

Judy, Unfortunately, that is true in a LOT of the markets out there. I get to see it from a pretty broad perspective as I deal with real estate people in 11 states and the news from all of them is about the same. Very few markets are making a come back at all and I still hear the familiar saying, "I simply can't even THINK of selling in this market". Those that are selling or listing are thinking in the long terms. In other words, they do not expect any real results in the near future but all have various reasons for listing in this market. I try looking at the glass as half full...hopefully, the turn around will be sooner than later but for now, most are just trying to hang in there.....

Excellent post Judy. This is a discomforting reminder that sometimes life throws you a curve ball. How you swing at it depends on your perspective. Although the conditions may be less than ideal, owning the home has always been best viewed as a long term investment. It's just that the starkness of that reality is more evident today.

Judy, Very good post! You wrote what many of us have been saying for a long time now. I too empathize with homeowners who purchased during the boom. Many of them truly are under 'house arrest'.

Hi Judy,

As promised....I reposted this (with a couple adds to avoid a duplicate post issue with Google)

TimandJulieHarris.com

Included were all the ways someone can contact you..hopefully you will get a few referrals!

Again, great post!

Tim

Judy, I don't entirely agree with the homeowners being behind their own bars for that many years, but the analogy sounds valid nevertheless, even though this is a large number of people underwater, there are those who did not buy or sell in the last 5-7 years, did not refinance of took money out, they simply stayed put and are now free to go whenever they want, they already have a hefty amount of equity, not all is as dark as you see it from your Realtor's view. The great majority of homeowners are and will be fine, for the rest, it will take some time, but not the 10 years mentioned, it will happen sooner.

Antonio

I can empathize with homeowners who are trapped in their homes. I am trapped in my education, for now. With just over $90k in student loan debt I am an indentured servant to the United States government. I could look at this with depression or take an optomistic stance. I choose optomisim. I have a post graduate education and with that education I plan on being a sucessful real estate agent. While many people are "trapped" in their homes perhaps there is an out of the box solution? I've heard of rental programs where homeowners rent rooms in their homes to tenants and this helps defray the costs of a flopsided mortgage. This is not necessarily an optimum solution as one must share their home, but it offers a means to help pay the mortgage. Perhaps there are other creative options?

FYI: A farkleberry is an evergreen shrub or small tree (Vaccinium arboreum) of the heath family, with bell-shaped, white flowers and round, black berries, found in the S U.S. (http://www.yourdictionary.com/farkleberry).

David - Love the pink shorts. Is that as in 'short' sales?

Al - The homeowners I'm talking about are underwater by $50,000, $75,000, $100,000, and more. A lot to eat. Recently I listed a home purchased at over $200,000 and now has a market value of less than $150,000. The homeowner lost his job 6 months ago and can't find new work. He's degreed, but the degree is worth next to nothing right now because it's related to housing. He took in a border to help defray costs, but rent is not the same as steady income. These are not easy problems to overcome.

Scott - The bright side of Florida housing is that newer houses have been built to better withstand hurricane winds. I have former neighbors who recently moved to Arizona, and they immediatedly commented about the shoddier construction methods compared to Florida.

Dave - I like your take on the word 'trapped'!

Brian - For a while we were looking to our Canadian neighbors and Brit fans to bail us out, but it takes a bit more than good exchange rates to solve our problems. Though I suspect Bryant Tutas would take exception, since he's on the right side of town (Disney et al) to take advantage of international buyers and investors.

Richard D - Thanks for understanding.

Lloyd - Yep, you understand the complexities. Orlando isn't a one-size-fits-all market.

Joan - :-)

Fernando - Wow, you blow me away. I didn't know this post would strike such a chord.

For those of you I didn't get a chance to respond to, know that I read every single comment and appreciate all points of view.

I've been very busy today and am now typing on fumes. As it happens, I'm pushing through 3 new contracts, and every one is a short sale!

You see, in my neck of the woods, a great majority of houses were built in the last 10 years. So, of course, my perspective is much different from those of you who live in established neighborhoods. Here, short sales and foreclosures are an epidemic. And those homeowners who aren't facing financial difficulties are mortally afraid of catching the disease!

JUL

2009

Hi Judy - from a fellow Chicagoan... thanks for telling it like it is! In October of 2006 I questioned the Chairman of the Chicago Federal Reserve Bank - click here to read my blog post/full story... Talk about a room full of 300 people looking at me and thinking "that blonde doesn't know what she is talking about!" Now, those people can say, WOW, she was right [she was really a brunette].

I say fire the Senators, Congressmen and more. Why are 83 year old Senators still on the payroll and not retired - because life is good if you're a Senator who remains clueless about the internet, cell phones and text messaging. America needs to start over with a whole new political system because this clearly is NOT working in anyone's best interest.

You bet the majority are trapped, and the Realtors didn't create this mess... the SEC was not only asleep at the switch, they were getting paid a salary, enjoyed vacations and had expense accounts... all paid for by us. There needs to be a grass roots movement. Real estate values continue to tumble and inventory mounts... here comes the commercial tsunami of foreclosures.

I question what NAR is doing - what are our lobbyists doing? Gen X & Y are going to find a better way around NAR and the current business model as we Realtors know it today.

Carol@CarolBest.net - http://www.CarolBest.net ** Hunter's Fairway |
Sotheby's International Realty
North Barrington, IL 60010

Judy,

Straight talk but so timely. It's sad to realize that so many homeowners are at the mercy of their mortgage right now. Some areas probably recover faster than others, but for many it's a long haul. House arrest is a good way to put it.

Judy, we're seeing multiple offers and rising prices in our area. Many people say that trends start on the west coast and then move to the east prior to hitting the mid-states. Keep your fingers crossed.

Judy - nice perspective that is simple and a nice view from outside the forrest. The effects upon homeowners are significant and magnify the age old pros and CONS of homeownership vs. renting.

Excellent, well written, well reasoned, entertaining post. And it helps that I agree with you. Keep up the good "righting".

What's a "langsat" (What In had to copy in the little box below)

Hi Judy,

That's why we are seeing strategic defaults. For a lot of people the home doesn't feel like home anymore. In my area, the homes in some neighborhoods lost as much as 60% of their value.

You have stated the problem well. I am thinking in 3 to 5 years we may see a lot of inflation that will help out. Also you never know what tomorrow may bring. No one (or at least few) predicted our current disaster.

Judy it is great to hear from a Real Estate Agent that isn't looking through rose colored glasses. We need to look at out markets realistically for our cleints and not just from the "RAH - RAH I can sell anything" point of view. It helps us help them better. Thanks!

Eugene- some people have a problem with anything political posted on AR no matter how honest it is. Surely, a few believe obama is doing an OK job too. Instead of adding a reply to the blog of others try posting one of your own.

You are almost poetic in your post. It is a nightmare within a nightmare. My heart really bleeds for the people who bought homes thinking they were the best investment they could make, or overbought or for whatever reason are now trapped, as you put it, by this market. I do broker price opinions for folks looking for refis or are behind, and it is heartbreaking as they stand by telling me how wonderful their homes are. Well, I agree; however, it will only bring what it will bring on the open market, people. Sorry.

Judy, your blog is very well written and puts the human side of the story up front where it should be. I wish our representatives would read your story and the comments. I have sold real estate through many recessions. In the past, the government came up with real estate incentives and it worked. As real estate goes, so goes the country. This time all the special interests had to be satisfied before real estate was even given a nod. If everyone who buys a house regardless of usage received the $8000 incentive, this crisis could be averted. Snowbirds would head to Fl, NV and AZ and buy second homes or investment properties. The longer this lasts, the worse it will become for your areas. We can't wait for our Association to lobby, we need to blog and email the heck out of Washington to get their attention.

JUL

2009

You are Right on Melissa!! For a democracy to survive there MUST be participation by the citizens. I have been flooding my elected reps with tea bags, calls and emails, that is the proverbial 2 x 4 to the side of their head, like you have to do to a stubborn mule to get their attention, Complacency and apathy lead to loss of freedom, liberty and democracy, Especially with this current administration hell bent on destroying democracy to install Socialism! Our democracy will only be saved if ALL of us actively participate!! Do it NOW!

Here's what I don't think I understand: Lenders are not only doing nothing to achieve workouts with folks who are underwater with their mortgages, in my area they are AGGRESSIVELY TRYING TO PUSH THE FORECLOSURE PROCESS ALONG even to the extent of not extending short-term financing (under 5 years) out another 6 months for a borrower who has NEVER BEEN LATE ON A PAYMENT! This is becoming a common story in our market. Meanwhile the Washington brain trust of President Obama is trying to figure out how to get through this mess when the answer was supposed to be addressed with the initial TARP funding which, as you'll remember, was designed to free credit lines trickling down to the consumer level. The sticking point? It wasn't mandantory that banks use the money for that purpose! Instead, they're using it to acquire other undervalued assets and, I believe, to freeze consumers out of the credit loop so they can foreclose on undervalued properties in anticipation of a recovering market fueled by an upcoming inflationary period where values go up to the point where the so-called "toxic assets" that caused the meltdown recover and become "non-toxic" again. Except that, when they do, they'll belong to the banking industry. For confirmation see a little chapter in our history called The Great Depression. Remember who got rich from it? Please, tell me I'm wrong.

JUL

2009

Very interesting perspective and sadly, very true. So many people in this position, wanting to sell but not being able to afford to sell!

JUL

2009

Excellent post! We have some of the same situation with a lot of families here in the Denver area, but nowhere near the extent that exists in your community. It just makes me more frustrated with the Goldman Sachs bailout that Paulson engineered for his old firm...

Lelis Navas

Great post!!!!!!Exact description of the picture. It is so taff, but is true.

Thanks for your excellent work!!!!!!!

AUG

2009

Wow you have your pulse on the American Dream, stalled!

Brenda Swigert,e-PRO
ReMax Unlimited West Chester, OH (Cincinnati suburb)

www.BrendaSwigert.com

AUG

2009

Judy - Your post looks at those moving down mostly. What about those moving UP?

Transfer into the area but can't sell your place back home.

Get a big promotion but can't sell your house to move up to a bigger one.

Have a baby - need more room - trapped in a too small house.

Get married - need to meld two houses and/or two families - trapped!

And so it goes! Most of the owners I have spoken with are taking the loss and going on with life. Great time to Rent?

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Judy Chapman

Northbrook, IL

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Koenig & Strey Real Living

Address: 1925 Cherry Lane, Northbrook, IL, 60062

Office Phone: (847) 272-0330

Cell Phone: (847) 859-9197

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