About a week ago, the Orange County Register had a story on page 1 of one of their sections–section 2 I think–about how the falling housing market is hurting the common man. They profiled two families. One is my next door neighbor and has decided to auction his home (March 1st for anyone interested. I’ll be the one sitting on my patio with a mint julep watching the proceedings). The other lives on the same Tustin street as a friend of mine and is probably going into foreclosure. From what I know of both, I would guess they are losing their houses because they mismanaged their finances, their expectations and the American Dream.
Here’s what I know about my neighbor. He renovated the house oddly–glass block windows, doors with no knobs, multiple master bedrooms, second floor balcony on the front of the house–and started and stopped the work often. In fact, he tore the back wall out, left it open to the rain and cold for a year, and finally closed it up when he decided to sell. It’s been on the market for a year and friends tell me it’s ‘odd’.
My neighbor started out right–selecting location, location, location and buying the worst home in the best neighborhood. It’s a customized track home on a half-acre equestrian-zoned lot. The guy he bought it from was kinda nutty. Answered our knock on his door once with a shotgun. This previous owner was over his head so I expect my current neighbor got a good deal on it.
I have friends who live down the street from the Tustin couple. They tell me the area is marginal with questionable development around it. The profiled couple admitted to purchasing over their head for $750,000, at the top of the market, intending to fix it up and sell quickly before the mortgage payments caught up with them. That might have worked if they had turned it before the market turned. But they rejected several offers, waiting for that dream one and the market collapsed. Now, they’ve lost their equity, their marriage and the down on a new home.
Owning a house is not as easy as it might sound. Like a marriage, you have to grow into it and compromise a lot to make it work. It hasn’t always been easy for my husband and I. We skipped many vacations, left the equity alone as much as possible, stayed in the same home for twenty years despite the almost irresistible draw to trade up. Also:
- we didn’t max out the equity on it. In fact, we left it in place despite the booming market and the euphoria that persuaded so many to feel it would never end and why not tap the equity. As a result, when my husband was out of work for seven years, we lived judiciously off of the equity and did just fine
- we made home improvements to standard tastes, to code and timely enough to prevent the dreaded deferred maintenance
I don’t think the reporters did their homework because neither of these families are examples of the little guy being destroyed by the falling market. They’re both victims of their own mismanaged dreams and those get-rich-quick schemes that only work for the guy at the top of the pyramid.