Have we learned nothing? HELOC rant

[nick__45]

The reason many people didn't sell their home when they predicted that price will fall and the bubble will burst is because they call their place a home, not a house or an investment to toy with. A home in a good neighborhood and school district is something you don't give up easily. And you can't buy your house back in most case because people buying your home probably won't be foreclosed on. Then the ridiculous selling and buying fees. The only people who always make money in real estate are reactors and banks. Everyone else tend to loose in the long run.

[jpg7n16]

The reason many people didn't sell their home when they predicted that price will fall and the bubble will burst is because they call their place a home, not a house or an investment to toy with. A home in a good neighborhood and school district is something you don't give up easily.

People's emotional attachments to a building are not my problem.

I wonder how many people would move if I offered them $150,000 to rent for 2 years. Wouldn't you? All you have to do is sell your home and rent for two years, and I'll give you $150k free and clear. Who would pass up that offer?

Now, what is the difference between me paying you $150k to move, or you selling your $350k home since you "know" the bubble will burst, and buying back when values have fallen to $200k?


My argument is that no one "knew" the bubble would pop. And it is unfair to criticize people on that point.


But if you considered a downside when considering buying a $350k home, maybe you'd decide that given the risks, you're only willing to offer $300k. Or maybe decide that due to the financial risks of the ARM, you cannot afford a $350k home, and look in a different neighborhood, at a more reasonable price.

But some people still would have made reasonable decisions to buy. And they still would have lost money, but not nearly as much as they would have otherwise.

Not considering a downside led to, "well can I afford the payment today?" Yes. "Then okay I'll take it."

And you can't buy your house back in most case because people buying your home probably won't be foreclosed on.

You can find a similar home. For $150k, I'd do it.

Then the ridiculous selling and buying fees. The only people who always make money in real estate are reactors and banks. Everyone else tend to loose in the long run.

That's just not true either. Your views are jaded by these past few years.

Just think how many grandparents bought their homes for $50,000 that are now worth $300,000.

Many people make intelligent real estate decisions. You can make money through rental income and property appreciation. Some people even make a living repairing and flipping homes.

The ones who do it intelligently account for risk, and have a margin of error on purchase price.

[disneysteve]

I wonder how many people would move if I offered them $150,000 to rent for 2 years. Wouldn't you? All you have to do is sell your home and rent for two years, and I'll give you $150k free and clear. Who would pass up that offer?

I would. I have absolutely no desire to move. It has nothing to do with money (okay, maybe if you raised the offer to $1 million I'd consider it ) but the hassle of moving is something that I hope not to do more than one more time in my lifetime, probably after I retire. Until then, I'm staying where I am.

[jpg7n16]

Well you're weird

and you prob have enough money that it doesn't matter. I would take that deal in a heartbeat.

[MonkeyMama]

Agreed with some of the others - my house is my HOME.

I would not move for $150k.

We strongly considered it for a $400k profit over what we paid (were in that position in 2005). BUT, apparently that was the tipping point for everyone - the market fell pretty swiftly after that.

My own personal tipping point is probably somewhere in the middle, since the $400k profit came with the only choice but to move out of state to buy or rent on some sane level. (I knew the market wasn't sustainable, but had lived in a region that has sustained unreasonable prices for many decades and clearly the run up in this city was long - not sure when it would turn. When we bought in 2001, many of our relatives thought WE were buying at the peak - the peak did not come until 2005 - was a long wait. Home values in our home town are still insane, 15 years+). Anyway, $400k premium over market would be a little different than $400k to have to move out of state.

Some underlying factors - our house is semi-custom built. We could potentially move and buy the same model on the same street, but it just wouldn't be the same. We'd have a LOT of construction on our hands to get the house how we like it. We have done a lot of house shopping, and we are pretty picky. Doesn't sound fun. There are other unique factors to our situation.

If I needed the money or could no longer afford my house??? That's another story. My house isn't worth going broke over. As sentimental as I may come off, I don't understand a lot of people's attachments to their homes when their situations turned extremely dire. If I lost my job and lost my house, I know there are plenty of other houses out there. But as long as I am content and happy in my "dream home" - I have absolutely no desire to give it up. $150k tax free? Eh...

[disneysteve]

Agreed with some of the others - my house is my HOME.

I would not move for $150k.

I'm glad I'm not the only weird one.

[disneysteve]

My argument is that no one "knew" the bubble would pop.

I disagree with this statement by they way. I think a great many people knew the bubble would pop, they just didn't know when.

[jpg7n16]

Really?? I know this is offtopic so I'll probably start a different thread to discuss, cause that's interesting.

I'm not saying, "here's $150k, and you lose your house" - I was saying "sell the home, keep whatever it sells for, and here's an extra $150k on top"; and you still wouldn't move?? I'd be all over such an offer.

I know it wouldn't be fun, but for $150k, I'd do it. To me, a house is just a building I live in. (technically, I live in an apartment now, but I used to live in a house) Buildings can be changed. So moving to a different building to live (for me) would be no big deal. It'd be a hassle at first, but really how much is that hassle worth saving? I might even do it for $30-40k.

Hmmmm.

But I think I'll stop highjacking DS's thread and go start a new one on this subject.

[jIM_Ohio]

The effects of the housing bubble have not hit bottom. Anyone which bought with less than 20% down is still underwater (I fall into that category) and short of either mass inflation (which would boost housing prices, real estate prices and commodities in general), or time to get from under, this credit bubble is far from over.

The housing crash was the first symptom of a credit bubble. The result was a tightening of credit. The question is, did the one "pop" of the housing market cure the whole credit bubble?

The housing bubble popping changed my view of leverage "forever". First thing I do when I get extra cash now is pay down my mortgage balance- not invest. Until I own my house, or have at least 75% equity, I could not see changing this view point (for me personally).

I agree with JPG in that people should "cash out" a house if they are sitting on a gain. My only qualification is that if the gain is more than 25-50% of your net worth, I would definitely cash out.

[disneysteve]

I agree with JPG in that people should "cash out" a house if they are sitting on a gain.

But then what? While the value of your house went up, so did the values of all of the other houses around you. If you sell your house, where will you live? Do you rent and hope that prices drop back down and then buy again? That means moving twice which is even a bigger pain than moving once.

In numerous threads, we have discussed whether or not a house is an investment and I always say no. If it is not an investment, why should I sell it just because the value went up?

[jIM_Ohio]

Originally Posted by jIM_Ohio
I agree with JPG in that people should "cash out" a house if they are sitting on a gain.

But then what? While the value of your house went up, so did the values of all of the other houses around you. If you sell your house, where will you live? Do you rent and hope that prices drop back down and then buy again? That means moving twice which is even a bigger pain than moving once.

In numerous threads, we have discussed whether or not a house is an investment and I always say no. If it is not an investment, why should I sell it just because the value went up?

You snipped my qualification.

I agree with JPG in that people should "cash out" a house if they are sitting on a gain. My only qualification is that if the gain is more than 25-50% of your net worth, I would definitely cash out.

If the gain is 20k-30k on a house worth 300k and houses are selling for between 300-350k, not a good idea.

If that same situation is a gain of 150k on a 300k house, and houses are selling for 200k, it is a good move.

If the person with a 150k gain on a 300k house has 2 M in bank, not a good move, if the person has 200k in the bank, a MUCH better move, assuming any gains are also invested.

The gain needs to be both a good percentage of the house value, and a high percentage of net worth (my qualification).

[jpg7n16]

Oh I wasn't saying "cash out if you have a gain" I was saying, if you definitively know that values are about to plummit, you should sell no matter whether you're in a gain or loss position. (which people like DS disagree with for non-monetary reasons)


I view it like a stock trading at $50. If you somehow "knew" this stock's bubble would pop in the next few months - year, you should sell. Whether you bought at $75 or $25 doesn't matter, cause right now it's worth $50, and it will shortly be worth a lot less. You can just buy back when the value drops a lot.

I feel the same about real estate. Others disagree with me on that, so I started a different thread to discuss


I was really only arguing against the idea that people should have "known" the values were about to go down

[jIM_Ohio]

Oh I wasn't saying "cash out if you have a gain" I was saying, if you definitively know that values are about to plummit, you should sell no matter whether you're in a gain or loss position. (which people like DS disagree with for non-monetary reasons)


I view it like a stock trading at $50. If you somehow "knew" this stock's bubble would pop in the next few months - year, you should sell. Whether you bought at $75 or $25 doesn't matter, cause right now it's worth $50, and it will shortly be worth a lot less. You can just buy back when the value drops a lot.

I feel the same about real estate. Others disagree with me on that, so I started a different thread to discuss


I was really only arguing against the idea that people should have "known" the values were about to go down

Thank you for additional context- yes you should sell to prevent losing capital.


The math looks something like this

Own a 200k house and have 50k equity
a 300k house sits down the road in same community.

Sell the 200k house and lock in your 50k equity

Prices of higher priced houses will swing more than cheaper houses. Prices drop 25%.

200k house is worth 150k now
300k house now sells for 225k

Buy the 300k house with 50k down... that house is now 225k, and the price appreciation will be a bigger percentage and higher amount. When prices rebound, the more expensive houses will lead the way and appreciate higher.

[scfr]

I disagree with this statement by they way. I think a great many people knew the bubble would pop, they just didn't know when.

I'll weigh in on this. My husband & I were among those who FELT very strongly that prices were unsustainably high (based on a combination of empirical data & "gut feeling") and had to fall. But I can't say that we KNEW for sure (we did not have a crystal ball). And prices fell further than we thought they would.

[disneysteve]

Oh I wasn't saying "cash out if you have a gain" I was saying, if you definitively know that values are about to plummit, you should sell no matter whether you're in a gain or loss position. (which people like DS disagree with for non-monetary reasons)


I view it like a stock trading at $50. If you somehow "knew" this stock's bubble would pop in the next few months - year, you should sell.

Yep, I definitely disagree. I don't think you can compare owning shares of stock to ownership of your primary residence. Those two things just aren't in the same league. I might agree with you if you were referring to an investment property but not in regards to your own personal home. As I've said many times, our home is an asset but it is not an investment. We did not buy our house with the intent or expectation of making a profit. As a result, we won't sell it when the value goes up. We won't sell it when the value goes down. We will sell it, if ever, when it no longer suits our needs.