They sat together, sipping wine, and gazing out at the lake on the creaky old deck that badly needed replacing. They would need to step gingerly for yet another summer, and live with that precarious deck a little bit longer.
They stepped into the garage, which should have been pitch black. But sunlight danced against the walls, travelling from the small holes in the roof. They looked at each other and shook their heads. They would need to cover the Christmas boxes with plastic and hope for the best.
Its going to be a long, hot, summer here in California. We are in the middle of a severe equity drought, and all those projects that used to be funded by real estate appreciation?
They will sit undone. Sorry, Home Depot.
Silly us. When houses were madly appreciating, we adopted the philosophy that "the house should pay for itself".
Now that we have to pay? Can you say MONEY PIT? It is completely different when you actually have to EARN the money to pay for home repairs. Ah, but those equitylines lulled you into a false sense of wealth. They sat there like safety nets and seemed like FREE MONEY.
The Bank of Equity is officially CLOSED.
"You, house. Yes, YOU. Why should I support your lazy ass? Go out and get a job like the rest of us and earn your keep." And so, the job of the house became to APPRECIATE. When roof leaked, and decks went bad, the house had to pay.
So we wrote the check from the equityline, the contractors appeared, and so did a blip of a payment when the equityline bill arrived. Not to worry. More appreciation would be right around the corner. The next raise/commission was on the horizon. Times were green and lush, and we were flush.
And so, that ritual of HOME IMPROVEMENT that takes place every year at this time, will just need to wait. Getting a new equityline is nearly impossible, with only a few players still around. Many who had equitylines, have had their lenders close the line.
Banks are reluctant to do "CASH OUT" refinances and will only do so when equity is plentiful, and borrowers are pristine. People lucky enough to have equity, may not be able to qualify to refinance due to the demise of most stated income loans.
And so, the highest earner in the family, the one that got a huge raise every year, has become disabled and can no longer bring in money.
Funny thing. The thought of actually EARNING that $20,000 to replace that deck? You know, the old fashioned way: you contribute blood, sweat, and tears, then nearly half disappears into taxes, and you save a little bit each month until you have the $20,000.
Not only does it seem damn near insurmountable, but who wants to spend it replacing a stupid deck?
We're stuck with you, old house. Your roof is leaking and your deck is creaking, so this summer just won't be as much fun. Our vacation money just may need to be thrown into the money pit.
Oh, well. Gas is expensive.
Written By Janet Guilbault, Mortgage Lending Expert Based Out of the San Francisco Bay Area
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