HELOC abuse is just as prevalent among women as it is among men. With all the free money floating around, it is to be expected that a woman who wanted to have the finer things in life would become accustomed to a lifestyle well beyond her means. Today's featured property is owned by a woman (as the decor makes obvious,) and she managed to borrow and spend herself out of her home. There is a certain Shakespearian Tragedy element to stories like these. Today's seller made a series of bad decisions which lead to her downfall. How are we supposed to feel when we see these situations? Part of me is sad that this woman is losing her home, and part of me is not sad because she brought this fate onto herself (and I suppose a little schadenfreude is mixed in as well.) The emotions we all feel when confronted with these stories serve to teach us all not to do what she did.
The distress at the low end of the market doesn't bode well for the high end. In a normal, healthy real estate market, small condos generally sell for the highest prices on a per-square-foot basis. When single-family detached homes where going for upwards of $400/SF, small condos were selling for $450/SF and up. Small properties cost more on a per-square-foot basis because the inexpensive square footage in bedrooms and living areas are much smaller, but the expensive square footage in kitchens and bathrooms are still present. Right now, in our market, the smaller condos are selling for much less on a per-square-foot basis than the larger, single-family detached homes. This situation will not persist. Either small condo prices will increase, or larger home prices will fall. I think it will be the latter.
Today we continue with our daily grind of speculators giving up. The featured property was purchased in 2005, then as much money as possible was taken out of the property, and the lender is left holding the bag.
This crash is going to take a long time. Even with the record number of foreclosures and speculators giving up en masse, there are still more speculators giving up every day. It seems there is a never-ending supply of 100% financing deals gone bad. This isn't that surprising when you think about it. Every speculator has a unique financial situation and a unique stubbornness when it comes to admitting a mistake. The combination of these factors means that some will hold on longer than others, so we will continue to see these people give up one-by-one for some time to come. They will all give up, and when they do, they add more fuel to the fire burning down our housing market. Even if some of them manage to avoid foreclosure, they will sell when they get back to breakeven to get out of the bad investment. There is no way prices will consistently rise again until all these people have been flushed out of the market. With each passing month, we get new foreclosure records, so the process is in full swing.
so worry not, all things are well, we’ll be alright, we have our looks and perfume...
I remember the atmosphere in the real estate market in 2004. There was excitement in the air, fortunes were to be made, and everyone had kool aid intoxication. It would have been impossible for those who drank the kool aid to even imagine they could lose money on the deal, particularly after the market continued higher for another 2 years. Fast forward to 2008, and most of these purchasers have less asset value than they paid, and prices are going lower every day. There is much denial in the market still. Everyone is livin' on a prayer.
Free eCourse Sign up for our free 16-part eCourse with the complete text of The Great Housing Bubble. There is no charge, and you can opt out at any time. Sign up now!
