Headline here: Houses are left behind to pay car, credit bills

[crisi]

Once again I am AMAZED!!! Apparently I did it all wrong

This has to be the most judgemental board I have ever seen.

Since the value of my home has dropped by by around 40%, I am WRONG??? That's just amazing.

And did you READ my post before slamming me???? I am NOT using my home as a "cash machine" I am not in one of those no down payment, no etc loans. As a matter of fact the ONLY reason I only put 20% down was that I felt that the housing market was topping and the return on my last sale could make me MORE money in another investment (which has proven to be right)

Honestly, some people deserve the judging. Others were a victim of circumstance. The problem is that the budget board often grabs the wide brush.

This happened in the 1980s in Hibbing, Minnesota and other towns in the Iron Range. Mining dried up. No other industry. What choice were people left with other than to leave their homes (no one around to buy them, few jobs) and try to start a new life somewhere else. Those people I have a hard time judging. They lived what they believed to be a responsible life based on what they knew to be true, that the mines would provide them jobs until they retired.

But other people have been funding a life they can't afford out of their house. My ex-sister in law (and therefore, by allowing it, my brother in law) did just that for years, then went bankrupt and sold their home (fortunately before the market softened). Her (and him) I can blame. Two people who own four motorcycles, a large RV, a $300,000 house and horses on $60k a year (to be fair, originally she worked and their income was twice that, but when she got laid off she didn't find an equivalent job - nor did they change their lifestyle - and to be fair the other direction $120k isn't enough for the lifestyle they had) and remortgage their home three times in six years....yeah, that was stupid.

 

[crisi]

I think the lesson in this housing crisis is that it's a really good idea to buy LESS house than you can afford, and re-mortgage only to get lower interest rates. It seems like most of the stories I hear like this are from people who either bought more house than they could afford (living on the edge) or refinanced to get cash for other expenditures like high credit card bills (also living on the edge). I think I benefited from having a dad that was out of work a few times, because it was really important to me that our mortgage be manageable if something happened and we only had one of our incomes. The irony of it all is that with home prices so depressed, more and more young couples will get into more house than they can afford now, so I don't see an end in sight. And as an aside, I sure wish the public schools took teaching personal finance as seriously as they take teaching algebra (I mean, who uses algebra after high school anyway?)!

When we built our house (10 years ago) we were given the advice by someone I do respect - "buy more house than you can afford, at your time of life, your incomes will only increase." Well, our incomes did increase and we could have afforded more house, but our expenses also increased - we added kids. We built a house that was worth about 2/3rds of what we qualified for. We were able to pay it off in seven years or so - and now put the mortgage into college funds (hope they don't collapse, but I'm nine years from college, they will likely recover even if they do). I'm financially conservative, so the idea of maxing my mortgage was something I didn't want. And I became financially conservative at the school of hard knocks, when my first husband left me holding the mortgage and car loan on my first house and first new car.

But I have cousins that bought at the height of the mania - because they believed that given the trending, if they didn't buy NOW, they'd never afford a house. Even if it was a huge stretch to buy. They bought starter homes with potential for too much money, but they were cheap homes at the time. I think about it and think of Rockefeller, who sold all his stock holdings before the 1929 crash when the shoeshine boy was investing in the market....

 

[ZPT1022]

If we both lost our jobs tomorrow and could only work 40 hours a week at McD's we could afford the house.

I highlighted this part because it shows the right attitude in general. If things happen that you didn't plan on (Because no one WANTS to lose a job), you do what you have to do to make it work.

This is a work ethic that sadly, many people do not share. My cousin is now married to this guy, and last year he lost his job. He then proceeded to sit on his butt for 7+ months. He finally started looking but nothing was good enough for him. For the record, the previous job was nothing elite.

We could never understand this. They have a child together, they have an apartment together. Where's the personal responsibility??

She had asked me to watch the kids when he got another job so I got to hear all about what was (or was not in most cases) going on with the job search. I get that if you lose a job you might want to make a new beginning doing something else, really, I do. But in the meantime, while you are waiting for the "perfect" job, you get a job. Any job. Dunkin Donuts, McDonald's, SOMETHING. You do not, as a grown man with children to support, sit on your butt.

Didn't give up smoking, or cable, or anything else either. So now he's finally got another job but he's declaring bankruptcy because surprise surprise, he couldn't keep up with payments being out of work for 7 + months.

I guess I've been needing to vent that for a while. It bugs the crap out of me. We work so hard to do everything right and watch people like that coast through life without a second thought.

It made me really happy Chicago526, to see someone who shares a similar value system

 

[Nancyg56]

While I agree that people need to stay within their means it is beyond my comprehension that financial institutions can offer the amount of financing and not know that this is way too much. Doesn't the lender bear any responsibility? When we bought our home lenders were only allowing what was a reasonable amount but these days seem to have disappeared. My son went around with his spread sheet because he had an amount set he would allocate towards his home yet his bank approved him for so much more. I have no doubt that had he gone to a mortgage company the amount would have been even more.

My younger son had initially been approved for a no document loan, so he was able to move back here without worries that he could get financing for the house. Well things began to change and he was told he needed a $12 an hour job. Are you kidding me? I was appalled that anyone would be told this, in our area that was nonsense.

Thankfully my sons are not financially irresponsible and they bought their homes as their home, not an investment. They also have had my DH, whose advice is financially conservative. There are so many others who don't have the benefit of sound advice from family or friends and must rely on these bankers who are not looking at the people but the commission. I believe that there is a lot of room for blame here and it does not all fall on the homeowner.

 

[Chicago526]

I highlighted this part because it shows the right attitude in general. If things happen that you didn't plan on (Because no one WANTS to lose a job), you do what you have to do to make it work.

This is a work ethic that sadly, many people do not share. My cousin is now married to this guy, and last year he lost his job. He then proceeded to sit on his butt for 7+ months. He finally started looking but nothing was good enough for him. For the record, the previous job was nothing elite.

We could never understand this. They have a child together, they have an apartment together. Where's the personal responsibility??

She had asked me to watch the kids when he got another job so I got to hear all about what was (or was not in most cases) going on with the job search. I get that if you lose a job you might want to make a new beginning doing something else, really, I do. But in the meantime, while you are waiting for the "perfect" job, you get a job. Any job. Dunkin Donuts, McDonald's, SOMETHING. You do not, as a grown man with children to support, sit on your butt.

Didn't give up smoking, or cable, or anything else either. So now he's finally got another job but he's declaring bankruptcy because surprise surprise, he couldn't keep up with payments being out of work for 7 + months.

I guess I've been needing to vent that for a while. It bugs the crap out of me. We work so hard to do everything right and watch people like that coast through life without a second thought.

It made me really happy Chicago526, to see someone who shares a similar value system

Oh, we aren't perfect by any means! We have debt, we've made a few not so great choices. But we do try to at least think things through a bit. And we've both worked since we were in our early teens, I think we'd get bored after a week or two of no work. Besides, I'm sure we could find something a little better than McD's, I was just using that as an example, we could take a huge cut in pay, just about down to minimum wage, and still keep the house (as long as each of us worked 50-60 hour weeks) and like I said, the odds of both of us losing our jobs at the same time are quite high. We would have to stop paying the CC's for a while to do it, but it could be done. Hopefully it won't ever come to that, unemployment would cover us until we could find something better than minimum wage, but if it ran out before we found something, then I guess we'd be flipping burgers!

 

[ZPT1022]

Oh, we aren't perfect by any means! We have debt, we've made a few not so great choices. But we do try to at least think things through a bit. And we've both worked since we were in our early teens, I think we'd get bored after a week or two of no work. Besides, I'm sure we could find something a little better than McD's, I was just using that as an example, we could take a huge cut in pay, just about down to minimum wage, and still keep the house (as long as each of us worked 50-60 hour weeks) and like I said, the odds of both of us losing our jobs at the same time are quite high. We would have to stop paying the CC's for a while to do it, but it could be done. Hopefully it won't ever come to that, unemployment would cover us until we could find something better than minimum wage, but if it ran out before we found something, then I guess we'd be flipping burgers!

LOL, of course no one is perfect, us especially. We've certainly made our share of bad choices, especially in college with credit cards. But we just seem to have the same work ethic- a week or maybe two off to regroup is one thing, but months and months of doing nothing - eek! DH even kept saying to me "I'd be bored out of my mind within a few weeks, I don't understand how he can stand it". And no, I can't really imagine ever actually working at McD's but it's more the "do what you have to do" sentiment, kwim?

 

[disneymom3]

cats mom, that's a good example on a huge scale. I completely agree with you about the lending, it was just so stupid and they had to know something would give.

Yes the lenders had to know something would give but what about the people who bought a million dollar home with $3000 down? Not attacking you,just using your post as a jumping off point. I mean, who could have ever thought that was a good idea???

I would love to move right now as DDs school is quite a drive, but I never thought about leaving my house behind. Of course, with this drive every day I pretty much feel like I live in my car anyway.

 

[LanaJae]

Yes the lenders had to know something would give but what about the people who bought a million dollar home with $3000 down? Not attacking you,just using your post as a jumping off point. I mean, who could have ever thought that was a good idea???

I would love to move right now as DDs school is quite a drive, but I never thought about leaving my house behind. Of course, with this drive every day I pretty much feel like I live in my car anyway.

Absolutely agree with that too. I blame buyers before I blame lenders, but you can find people who did that who will say something like "at the rate values were increasing, I thought I would double my money in 2 years." I could have the same philosophy at a casino! (and we know how that would turn out)

OT now, but I'm seeing the housing crisis play out again with vehicles. Tonight on TV I heard this commercial 5 times...

"Got a job? Got just one dollar?" You could be in a new car with just one dollar down!" "No credit? No problem, all you need is a job and $1 down."

 

[arminnie]

There was another thread about this not long ago. The focus, I believe, was Michigan. Somewhere were lots of people were out of work, there were no new jobs to be had, house prices were dropping like crazy (and didn't seem that high to begin with, at least to me), and there are foreclosures in every neighborhood. That also got ugly.

It can happen to anyone if the circumstances are right/wrong.

And if it does - well just deal with it and go on. Lots of bad things happen to good people.

And I am speaking from EXPERIENCE. I owned 3 homes in Texas in the early 80s. (I'd been transferred a lot). I put down 20% on all of them. Rents and property values both were cut in HALF as was my salary.

Had to cash in my retirement, IRA, savings and pay LOTS of taxes including on the amount of a short sale in one instance. It took a long time before I was out of debt.

I guess I'm irritated that everyone now is expecting a bailout. No one gave a damn about Texas, Oklahoma, Colorado and Louisiana when we were dying in the early 80s and the rest of the country was flying high.

I learned one very important lesson - NEVER buy something as an investment that requires feeding. If I'd invested in stock that had crashed I could have just left it in an account to recover eventually. Not so with real estate - even w/o a mortgage there are taxes, insurance and maintenance.

 

[eliza61]

I guess I'm irritated that everyone now is expecting a bailout. No one gave a damn about Texas, Oklahoma, Colorado and Louisiana when we were dying in the early 80s and the rest of the country was flying high.

I learned one very important lesson - NEVER buy something as an investment that requires feeding. If I'd invested in stock that had crashed I could have just left it in an account to recover eventually. Not so with real estate - even w/o a mortgage there are taxes, insurance and maintenance.

This made me chuckle My teenage sons who don't quite grasp the definition of saving a buck are driving me especially crazy with the "can I have" this week.

There are many financial gurus that think the bailout is a huge mistake and believe it is a natural resetting of the ridiculous housing market. It's an election year, both parties want you to feel warm and fuzzy so you'll vote for their guy, so they throw these half baked solutions out there.