Goodnight Boon
The May 2006 issue of Harper's arrived today, and the article "The New Road to Serfdom: An illustrated guide to the coming real estate collapse," by Michael Hudson, paints a frightening picture of what is to come for those who purchased homes at swollen prices and financed the whole nut with sticky mortgage products. The cover illustration of a man in work shirt and pants, a brick house strapped to his back, says it all. Falling Real Estate Values + High Mortgage Debt = Negative Equity.
Since my husband and I have started searching for a house, I've felt like a party pooper. I know absolutely nothing about real estate, but while everyone around was giddy with buying and selling, I was cringing, thinking, This can't be real.
Last August, when my father-in-law warned that if we didn't buy then, we'd never be able to afford a house the following summer, I was tempted. We found an agent and toured a half a dozen properties, but when it came down to making an offer, I couldn't do it. Everything we looked at seemed so damn expensive. Besides, we didn't have a down payment—not that that matters these days—and my gut told me that 100% financing would get us into hot water.
We've been living in my in-laws' camp for eight months now, and we have to find something soon, but I breathe a sigh of relief when I think about what could have been. I hope my fear doesn't come across as smugness. I have good friends who bought a house with nothing down and financed the closing costs, and I am worried for them.
What I am is angry—with lenders who play fast and loose and deemphasize the risks the average homeowner is taking.
I want my own house so badly I can taste it, but we've got to do this the right way, which, apparently, is also the hard way.
posted by Mountain Girl @ 3:34 PM
1 Comments:
We bought our first house with about 10% down. We had to pay mortgage insurance because of it. That was roughly 8 years ago. We've since moved from that house in to a nicer house in a nice neighborhood. After only owning for 8 years we have over 50% equity in our house. While it seemed expensive and stressful when we made our first purchase, I look back and am really grateful that we did that. I think that you will really be glad that you did it a few years from now. Just follow the "traditional" guidelines of not buying more house than you can afford. (They say something like 33% of your income towards a house payment but if you have no other debt, you can get away with a little higher percentage). I think the trick is to only have mortgage debt and no other debt. Our mortgage is literally the only debt we have and it's very comfortable to make that payment. Anyway, I'm just trying to give you a few words of encouragement towards home ownership since I feel like it's really benefited my family. I certainly know a few people who are worth far more than I am and they don't own a house, so I definitely see both sides of the coin.
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