Many of us read Inman on line. They just started a three part series highlighting stories from actual homeowners who are upside down and facing foreclosures. The first part was very insightful, covering several different homeowners: one who lives in her property and finds herself upside down because of the market and the terms of her loan; a guy in Atlanta who said he unfortunately purchased investment homes at good prices in neighborhoods that weren't the best investment areas. You can read the entire article here.
It was sad but insightful to read how they got into trouble because of job losses or not enough reserve money. Here is a quote regarding one homeowner:
"....A painting contractor, Knight has worked to sell off several investment properties at a loss and is working with a real estate agent to complete a short sale on her primary residence. Job troubles and high monthly payments have put her into a foreclosure process..."
One homeowner talks about going into home ownership with $175,000 in the bank and a 700 credit score. Then, having to resort to putting expenses and bills on credit cards, everything went to hell and a handbasket. And all of this happens quickly. Another quote from the article:
"....[The home owner] recommends that homeowners build up a substantial reserve that can sustain them during times of hardship, such as the loss of a job or a death in the family. She also said that people should research their loans thoroughly...."
While this article details first hand accounts dealing with home owners who are not in the Cleveland area, the principles and results are the same. I've had conversations with homeowners experiencing the same issues for the same reasons. One last quote from the article, because it's rather poignant:
".... You could easily call it the quiet poverty," she said of the rush of nationwide foreclosures. "It affects everybody. Nobody is coming out of this unscathed. It's wiping out the market...."
I have advised clients who wanted to invest and not live in homes in areas with high foreclosure issues to think things through carefully. One community specifically, had close to 700 homes for sale this Winter when we were shopping for homes. Ultimately this client did not purchase, but truthfully? Not because of my guidance. His job situation changed (thankfully) before he got into a contract situation. He was hell bent on buying in this area. Sometimes no matter how much we provide guidance it doesn't work. Karma stepped in this time.
Once you read this article written by Glenn Roberts, Jr., sign up for the email notification, if you haven't already; Inman is a great place to read about real estate. And there are still two more parts to the story.
September 14th update: Here is an article in Time Magazine that talks about the correlation between our economy and the housing market. Overall it's rather good. There is also one really good paragraph I want to hightlight here; it speaks to our upside down market woes:
'....The main reason for the boom's doom was that in the nation's San Diegos, double-digit annual price increases put most homes out of the reach of middle-income buyers. The mortgage industry and its funders on Wall Street responded with laxer lending standards and creative loans (no downpayment, teaser rate, interest only, etc.) that really made sense for borrowers only if prices kept going up and they could sell at a profit or refinance. When prices stopped rising last year, the edifice began to crumble...."
NOTE: I want to add this excellent article written by David Briggs of the Cleveland Plain Dealer. He's on the same topic, using himself as an example of moving up to more and more expensive homes. Also worth the read!
Peace Out - 3C
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