One could be very frugal and responsible and still be 100k underwater on their house in these times. If you painfully sacrificed and saved to put a 20% down payment on a house in 05 or 06, you could easily be in this situation. It would have taken a lot of economic awareness and market smarts to have been wise enough to hold off buying. And even if you were that wise, the temptation to then buy after prices went signficantly down, thinking they had bottomed out, would have been overwhelming.....and you would have gotten stuck anyway, though for less.
I am very sorry for those who find themselves in this predicament. I guess too many people have no valid common sense. I warned my daughter that 2006 was not the time to buy because I knew what was surely coming, having been a real estate broker for over 30 years, retired. Even she did not heed my warning, and her husband took out an interest only loan!!! I about lost it when I found that out! Bright as they are, they have no sense when it comes to money.
“One could be very frugal and responsible and still be 100k underwater on their house in these times. If you painfully sacrificed and saved to put a 20% down payment on a house in 05 or 06, you could easily be in this situation. It would have taken a lot of economic awareness and market smarts to have been wise enough to hold off buying.”
Really? I don’t consider myself particularly wise or prescient (although apparently a lot more so than many people) and I could see this coming at that time. When homes had appreciated by 50% to 100% in just a few years, all the signs of a bubble with a correction to come were there for anyone with a functioning brain and a realistic outlook to see. I understand the desire of many people to get into a house of their own, and to take advantage of what seemed like an ever-rising market - but those were emotional reasons to buy, and when it comes to money there’s no substitute for a rational approach.
Case in point, I am going through a nasty divorce and I now have to refinance the house we built 6 years ago. We are ~$23K upside down on it based on the current appraisal, but I don't have much choice as it is on acreage that I owned and paid for before the marriage that is actually increasing in value due to the location and I am determined not to sell that property. Plus the central air went up in smoke the week after he left and I ended up replacing it which cost me a bundle and of course, I am having to eat that cost in the divorce settlement. The only upside is I was able to negotiate to bring the interest rate down and therefore the payments, so that it will fit easily within my budget without his income.
Fortunately, I was responsible enough to never let our budget exceed my income as I was concerned about things like him losing his job, which he conveniently did. The worst part is after he abandoned me physically and financially the day after I got home from hip replacement surgery (fortunately I also had disability insurance at work), moved in with his girlfriend and is admittedly staying on unemployment so he can claim "poverty" in the divorce, he is now bragging to everyone that he is "giving" me the house...ummm no, I don't think so.
Nonsense. Here's my former house on Zillow. The dollar sign is where I sold it.
And I am NO financial genius, if you saw the rest of my portfolio you'd be convinced of that.
When I saw people with $75K incomes buying houses in my neighborhood for close to half a mil, I knew it was time to head for the door.
No rational person could have thought that the housing boom of 2002-05 was permanent. There were a lot of crooks that kept saying it was though, and a lot of fools who listened to them.
I bought my second house in 2000 (a modest, 1800 sq ft colonial), with about 10% down and have been paying a little extra on it for 10 years. I’m still easily $50000 underwater. Prices are down up to 70% in our area. Smart or stupid had nothing to do with it.