Need a bigger home, but underwater in my current home
March 11, 2010 11:27 AM Subscribe
Currently, at no fault of our own, we live in a 2 bedroom townhouse mortgaged for about 367, and now worth about 275. My wife and I despretly need a bigger home, with an expanding family(children). We have one, and probably gonna have another in the next year. What should we do? Please see explanation for our options as we see it.
1. Short Sale - not sure my bank (Wells Fargo) will go for it, further, can't take a hit on my credit for my security clearance.
2. Rent and Rent - easiest option, but need to find a renter, and a place to rent...
3. Rent our home, and buy another - not sure anyone will lend me another mortgage.
4. Rent our home, and buy another with a cosignor - we might be able to do this, just not sure if banks will allow it... this is what we are leaning to....
5. Walk away - not an option b/c of security clearance
1. Short Sale - not sure my bank (Wells Fargo) will go for it, further, can't take a hit on my credit for my security clearance.
2. Rent and Rent - easiest option, but need to find a renter, and a place to rent...
3. Rent our home, and buy another - not sure anyone will lend me another mortgage.
4. Rent our home, and buy another with a cosignor - we might be able to do this, just not sure if banks will allow it... this is what we are leaning to....
5. Walk away - not an option b/c of security clearance
I think you are confusing desperate need with desperate want. Stay where you are, and get rid of some stuff if the place feels too crowded. Plenty of people grew up sharing a room with a sibling and in places like NYC, it's not uncommon for a family of four to live in a two bedroom. I agree with cooker girl... stay put and hopefully the market will recover.
posted by kimdog at 11:38 AM on March 11, 2010 [32 favorites]
posted by kimdog at 11:38 AM on March 11, 2010 [32 favorites]
Considering your clearance situation, I'd say your best bet would be to (1) hold off on that second kid for another year or two until you can unload the house at closer to what you paid or (2) if that's not really an option, well, sharing a room is a character-building experience.
posted by Oktober at 11:38 AM on March 11, 2010
posted by Oktober at 11:38 AM on March 11, 2010
Why can't the kids share a room? My brother and I shared a room until we were 11 or 12. At least then you can wait out the housing crash and maybe come out ahead.
posted by sanka at 11:39 AM on March 11, 2010 [2 favorites]
posted by sanka at 11:39 AM on March 11, 2010 [2 favorites]
Lots of kids share rooms, and lots of families bigger than yours live in spaces smaller than yours. I'm sorry that you can't have your dream home, but wanting more space doesn't constitute a "desperate need."
posted by decathecting at 11:40 AM on March 11, 2010 [9 favorites]
posted by decathecting at 11:40 AM on March 11, 2010 [9 favorites]
It seems to me that your best option right now would be to stay put. See if property values start to go back up. Is it absolutely necessary to have another kid this year? What about next year? Or the year after?
My sister and I lived our entire childhoods in a 2 bedroom townhouse with our mom & step-dad. We shared a room and it was mostly fine. My husband's grandparents raised a family of 5 kids in an 800 square foot, 2 bedroom house, not because they wanted to, but because they had to. None of them seem scarred. One kid and one maybe don't equal desperate, imho.
posted by SamanthaK at 11:43 AM on March 11, 2010
My sister and I lived our entire childhoods in a 2 bedroom townhouse with our mom & step-dad. We shared a room and it was mostly fine. My husband's grandparents raised a family of 5 kids in an 800 square foot, 2 bedroom house, not because they wanted to, but because they had to. None of them seem scarred. One kid and one maybe don't equal desperate, imho.
posted by SamanthaK at 11:43 AM on March 11, 2010
Hey, hey, hey, yes, we know that kids can share a room, but waiting for a housing to rebound, would also mean we couldn't afford ANYWHERE near where we live... yes we don't NEED, but we would like to live close to the city (DC area). right now 4 bdrm homes are going for around 275/300... if housing rebounds, they will be way out of my range... so, yes, we could share rooms, we could wait, but its tough to let great homes slip away and a pretty good rental market slip away (live close to a military base that is having lots of people move in)
posted by fozzie33 at 11:44 AM on March 11, 2010
posted by fozzie33 at 11:44 AM on March 11, 2010
Everyone telling the kids to stay in the same room seem to be assuming that the house will rise in value by about 35-40% in a reasonable time frame for the asker sell it when the third child becomes a reality. I think what he is asking is how to handle a home that is in essence permanently underwater, not how to manage two kids who each want a separate room.
Yes, I agree that they should hold off on another child for another year or two, but at that time the house may still be well underwater.
posted by arco at 11:45 AM on March 11, 2010
Yes, I agree that they should hold off on another child for another year or two, but at that time the house may still be well underwater.
posted by arco at 11:45 AM on March 11, 2010
(wait, how did I get three kids out of the question? Sorry about that! Still I think there may be some useful advice for the financial side of this if we stick to the question.)
posted by arco at 11:48 AM on March 11, 2010
posted by arco at 11:48 AM on March 11, 2010
You will survive living in a smaller space with a kid. People do it all over the world (and the US) all of the time. There's no desperation in your situation. If you want to rent it, go ahead, but you'll be okay if you have two kids and two parents in a two bedroom townhouse.
posted by anniecat at 11:49 AM on March 11, 2010
posted by anniecat at 11:49 AM on March 11, 2010
I forgot to add, I don't understand your question because you know what your options are and there aren't any creative solutions around it. You have to do whatever you think is best for you. I think the majority of us think it's best to stay in your townhome, but all the other options you put out there are pretty much the same or up to the bank if they're willing to lend you a mortgage for another home.
posted by anniecat at 11:52 AM on March 11, 2010 [1 favorite]
posted by anniecat at 11:52 AM on March 11, 2010 [1 favorite]
its tough to let great homes slip away
Life can be a lot tougher. Stay put, hold off on the +1, stop looking at houses you can't buy.
posted by holgate at 11:54 AM on March 11, 2010 [15 favorites]
Life can be a lot tougher. Stay put, hold off on the +1, stop looking at houses you can't buy.
posted by holgate at 11:54 AM on March 11, 2010 [15 favorites]
You're probably also not going to want to hear this, but it sounds like you're restricting the radius of your search to the Northern Virginia area, which in this economy, is a little foolish.
If space is what you want, you need to be willing and ready to investigate places outside of the white flight zone. I know, it sounds harsh, but I can't tell you how many times I've heard suburban DC'ers complain about how they can't afford to buy a place when there are spacious, safe, and very attractive homes and neighborhoods in Maryland--and yes, in Prince George's County as well. If you're really in desperate need--as you say--then you should give serious thought to looking further afield than the Arlington/Alexandria/Falls Church corridor.
posted by yellowcandy at 11:54 AM on March 11, 2010
If space is what you want, you need to be willing and ready to investigate places outside of the white flight zone. I know, it sounds harsh, but I can't tell you how many times I've heard suburban DC'ers complain about how they can't afford to buy a place when there are spacious, safe, and very attractive homes and neighborhoods in Maryland--and yes, in Prince George's County as well. If you're really in desperate need--as you say--then you should give serious thought to looking further afield than the Arlington/Alexandria/Falls Church corridor.
posted by yellowcandy at 11:54 AM on March 11, 2010
Thank you Arco, yes, we made a poor decision by buying a home at the top of the bubble, but that being said, we are doing well financially, we have not missed payments, nor are we struggling, we just see homes that are nice, at an am amazing price now, and know that when we can "break-even" in our home, those priced homes won't be in the area when that time comes...
and for you people suggesting we wait on having kids, we are, but we know that we waiting till our home can be sold, isn't going to be an option, especially if we can't get out from under the home... so no need for parenting advice...
posted by fozzie33 at 11:54 AM on March 11, 2010
and for you people suggesting we wait on having kids, we are, but we know that we waiting till our home can be sold, isn't going to be an option, especially if we can't get out from under the home... so no need for parenting advice...
posted by fozzie33 at 11:54 AM on March 11, 2010
How much are your mortgage payments now? How much would your place rent for? How much can you afford to spend each month for mortgage/rent? How much do you have in savings for a down payment?
Surely the answer depends heavily on these numbers.
posted by equalpants at 11:54 AM on March 11, 2010 [1 favorite]
Surely the answer depends heavily on these numbers.
posted by equalpants at 11:54 AM on March 11, 2010 [1 favorite]
So you're not, in fact, asking how to get a bigger home for your growing family. You're asking how to invest in real estate at a low price when you've already invested in real estate and lost.
There has been a lot of writing lately about the changing way people view their homes. It used to be that people viewed their homes as a great investment that would always rise in value and which, oh by the way, gives them a place to live. That's recently been disproven. Now, experts are encouraging people to view their homes primarily as places to live, and if they happen to make money when they sell, so much the better. Right now, you have a place to live. Don't put that in danger in order to pursue a great deal on an investment someplace else. If you can afford to sell your current place to live and pay off your loan in full, go ahead and buy a new house. Otherwise, I'd suggest staying where you are and paying off your mortgage as quickly as you can until you can afford to move.
I know it's tough to think about paying more for a house in a few years, but if lots of people want to move to your area, you'll make more selling your house too. Everything will be fine, but don't put your family's financial health at risk by rushing into something you can't really afford.
posted by decathecting at 11:56 AM on March 11, 2010 [13 favorites]
There has been a lot of writing lately about the changing way people view their homes. It used to be that people viewed their homes as a great investment that would always rise in value and which, oh by the way, gives them a place to live. That's recently been disproven. Now, experts are encouraging people to view their homes primarily as places to live, and if they happen to make money when they sell, so much the better. Right now, you have a place to live. Don't put that in danger in order to pursue a great deal on an investment someplace else. If you can afford to sell your current place to live and pay off your loan in full, go ahead and buy a new house. Otherwise, I'd suggest staying where you are and paying off your mortgage as quickly as you can until you can afford to move.
I know it's tough to think about paying more for a house in a few years, but if lots of people want to move to your area, you'll make more selling your house too. Everything will be fine, but don't put your family's financial health at risk by rushing into something you can't really afford.
posted by decathecting at 11:56 AM on March 11, 2010 [13 favorites]
Hey, hey, hey, yes, we know that kids can share a room, but waiting for a housing to rebound, would also mean we couldn't afford ANYWHERE near where we live... yes we don't NEED, but we would like to live close to the city (DC area). right now 4 bdrm homes are going for around 275/300... if housing rebounds, they will be way out of my range... so, yes, we could share rooms, we could wait, but its tough to let great homes slip away and a pretty good rental market slip away (live close to a military base that is having lots of people move in)
It sounds to me, based on the fact your house is worth almost 100k less than it was before, that you're not in a position to take advantage of a great housing market. Just because it's a great time to buy doesn't mean you stretch yourself thin trying to take advantage...isn't that how most got into this mess? Taking on way more debt than they should?
275/300k on a new mortgage, plus the loss you'll take on your existing home, plus the expanded cost of having another child....that's a lot of financial stress to take on at once.
posted by Hiker at 11:57 AM on March 11, 2010 [3 favorites]
It sounds to me, based on the fact your house is worth almost 100k less than it was before, that you're not in a position to take advantage of a great housing market. Just because it's a great time to buy doesn't mean you stretch yourself thin trying to take advantage...isn't that how most got into this mess? Taking on way more debt than they should?
275/300k on a new mortgage, plus the loss you'll take on your existing home, plus the expanded cost of having another child....that's a lot of financial stress to take on at once.
posted by Hiker at 11:57 AM on March 11, 2010 [3 favorites]
@yellowcandy we aren' t limiting ourselves to that corridor, we live outside the beltway near springfield, va, my wife teaches in fairfax county, i work downtown.. we have considered homes all the way up in frederick... but the same situation is there... we wait 2-3 years, those homes could rebound as well...
posted by fozzie33 at 11:57 AM on March 11, 2010
posted by fozzie33 at 11:57 AM on March 11, 2010
if housing rebounds, they will be way out of my range...
Fozzie, I doubt this is happening any time soon.
Housing prices should actually continue to drop. Unemployment is still rising. Nobody has money to buy homes. Financial markets are still in a world of hurt. Many people in their 50s and 60s are not expecting the housing market to ever reach their former (bubble) prices IN THEIR LIFETIMES.
My bet is that a house you buy now will be even cheaper if you wait around even a year. (And my estimate is that prices will continue to hold steady, if not decline, for at least the next 5 years, if not decade.) If I've heard correctly, there is still another wave of foreclosures the banks haven't unleashed yet upon the market.
posted by The ____ of Justice at 12:02 PM on March 11, 2010 [2 favorites]
Fozzie, I doubt this is happening any time soon.
Housing prices should actually continue to drop. Unemployment is still rising. Nobody has money to buy homes. Financial markets are still in a world of hurt. Many people in their 50s and 60s are not expecting the housing market to ever reach their former (bubble) prices IN THEIR LIFETIMES.
My bet is that a house you buy now will be even cheaper if you wait around even a year. (And my estimate is that prices will continue to hold steady, if not decline, for at least the next 5 years, if not decade.) If I've heard correctly, there is still another wave of foreclosures the banks haven't unleashed yet upon the market.
posted by The ____ of Justice at 12:02 PM on March 11, 2010 [2 favorites]
Talk to a homeowners advocacy group and other people with security clearances to be sure you really don't have the option of walking away. I don't know anything about credit and security clearances, but you should be 100% sure that short sale or walking away would sink your career before you rule them out.
I find it hard to believe that with the number of people with security clearances in D.C. that the housing market would be as volatile there if that reason alone kept people in their homes.
Are you sure there are no special provisions or programs for people like you?
Yes, it's unlikely you will recover the value on your house and it's in your interest to get rid of it any way you can. That does not mean you need a new house with 4 bedrooms, or you have to buy now-now-now. Protect yourself financially, first and foremost, which is not to be confused with trying to do something you think will be profitable in a few years.
posted by slow graffiti at 12:04 PM on March 11, 2010 [1 favorite]
I find it hard to believe that with the number of people with security clearances in D.C. that the housing market would be as volatile there if that reason alone kept people in their homes.
Are you sure there are no special provisions or programs for people like you?
Yes, it's unlikely you will recover the value on your house and it's in your interest to get rid of it any way you can. That does not mean you need a new house with 4 bedrooms, or you have to buy now-now-now. Protect yourself financially, first and foremost, which is not to be confused with trying to do something you think will be profitable in a few years.
posted by slow graffiti at 12:04 PM on March 11, 2010 [1 favorite]
Assume for a moment that your house was currently worth exactly what you paid.
Would you consider adding on/remodeling - or just moving?
If an add on/remodel is a consideration in that scenario, perhaps you should consider it now.
After all:
posted by terpia at 12:07 PM on March 11, 2010
Would you consider adding on/remodeling - or just moving?
If an add on/remodel is a consideration in that scenario, perhaps you should consider it now.
After all:
- While unlikely to rebound to the height of the market any time soon, housing prices will likely rise over the years, so if you had planned on living there for a while - why change?
- You don't have to birth another child in the next year, do you?
- You can have small children without needing a bedroom for each. Totally possible to get by for a few years, although we don't know the age of your existing child.
posted by terpia at 12:07 PM on March 11, 2010
Just as an FYI...we're house hunting in the DC area right now and at least three of the houses we've been interested in have been Wells Fargo short sales, so that probably is an option for you. If you want to find out more about short selling your home, I would (a) talk to a real estate that is experienced in short sales and (b) talk to a lawyer, also experienced in short sales. I don't know how these things affect security clearances, you should contact either your agency's SSO or your company's security officer (if you're a contractor) and ask them for more information.
But also, ditto what everyone else is saying - personally I think it's a better bet for you to stay where you are if feasible (or hold off on the second child until you're in a better place financially).
Also, where on earth in the DC area (close to the city) are you finding nice 4 bedroom homes for $275 - $300K?
posted by echo0720 at 12:07 PM on March 11, 2010
But also, ditto what everyone else is saying - personally I think it's a better bet for you to stay where you are if feasible (or hold off on the second child until you're in a better place financially).
Also, where on earth in the DC area (close to the city) are you finding nice 4 bedroom homes for $275 - $300K?
posted by echo0720 at 12:07 PM on March 11, 2010
Best answer: Having sort of come to your defense upthread, now let me side with most everyone else here by saying that you absolutely should not allow the "great opportunities" in the market near you to be a driving factor in your decisions around housing. That sounds too much like the hype-machine stuff that got so many people in a lot of trouble over the last few years. You must first get your family's house in order as much as possible (emergency funds in place, saving a chunk for a down-payment on a bigger house, pay off all other debts, etc.). The variable is the value of your current place, which you have little to no control over, so take control over the things you can. Perhaps you should delay the next kid for a little while, save up as much money as possible, cut expenses as much as you can, and even get a part-time job to accelerate your savings. But absolutely do not look at that cute little 4-bedroom in Dumfries and get the itch to put your family in a financial hole you may never climb out from.
My wife and I are in a very similar situation to yours: bought in DC area near height of market, now wanting to move to a larger place because of planned family expansion, except for us we are only $15k-$20k underwater and currently live in a 1-bedroom condo (no kids yet). Our tactic: wait, save, and don't get too worked up over the supposedly great houses that we realistically cannot afford right now.
posted by arco at 12:11 PM on March 11, 2010 [4 favorites]
My wife and I are in a very similar situation to yours: bought in DC area near height of market, now wanting to move to a larger place because of planned family expansion, except for us we are only $15k-$20k underwater and currently live in a 1-bedroom condo (no kids yet). Our tactic: wait, save, and don't get too worked up over the supposedly great houses that we realistically cannot afford right now.
posted by arco at 12:11 PM on March 11, 2010 [4 favorites]
6) Just accept that this is your house and you can't afford to buy a different one.
The real question is: can you afford the payments you're making now? If yes, then you should stay put and put your energy into making changes to the decor and arrangement of your current home that will make it work for you longer term. What the value of your home is doesn't really enter the equation so long as you can still afford the payments and its still in a place that works for you.
Its your home, not an investment to be discarded as you feel like it.
Have another child if you like (and can afford it). Plenty of us grew up fine in two bedroom houses. Plus, I'm sure your home has some space (a room being used as an office or den, perhaps?) that can be used as a third bedroom somewhere down the line.
You don't need to move, you just want to move. There is a big difference between the two.
posted by anastasiav at 12:16 PM on March 11, 2010 [1 favorite]
The real question is: can you afford the payments you're making now? If yes, then you should stay put and put your energy into making changes to the decor and arrangement of your current home that will make it work for you longer term. What the value of your home is doesn't really enter the equation so long as you can still afford the payments and its still in a place that works for you.
Its your home, not an investment to be discarded as you feel like it.
Have another child if you like (and can afford it). Plenty of us grew up fine in two bedroom houses. Plus, I'm sure your home has some space (a room being used as an office or den, perhaps?) that can be used as a third bedroom somewhere down the line.
You don't need to move, you just want to move. There is a big difference between the two.
posted by anastasiav at 12:16 PM on March 11, 2010 [1 favorite]
I'm going to revise and extend, following slow graffiti's comment. If it's truly the case that your career depends, via your clearance, on your credit score, then you're somewhat stuck. But I don't buy the "moral" argument that's sometimes made for staying in a house bought at an inflated value when the cost/benefit of walking away makes sense, especially not when property developers and owners of commercial real estate are doing so. But you need an independent financial advisor to make that call.
(If anything, I'd consider the financial pressure of being underwater on a mortgage far more of a security risk than the credit hit from a default or short sale: "tell us what you're doing and we'll help you out with the repayments." But I don't make those judgements.)
posted by holgate at 12:18 PM on March 11, 2010
(If anything, I'd consider the financial pressure of being underwater on a mortgage far more of a security risk than the credit hit from a default or short sale: "tell us what you're doing and we'll help you out with the repayments." But I don't make those judgements.)
posted by holgate at 12:18 PM on March 11, 2010
I may be missing something here, but aren't both your current house's value, and the prices of houses you would like to move to, both affected by the overall housing market? In other words, yes, the housing market might recover and make other houses more expensive, but wouldn't that also mean that the value of your current home would also rise, thus making it a little simpler for you to sell and move?
Likewise, aren't the lower costs of those other houses caused by the same forces that mean your current house is "under water"?
posted by amtho at 12:21 PM on March 11, 2010 [1 favorite]
Likewise, aren't the lower costs of those other houses caused by the same forces that mean your current house is "under water"?
posted by amtho at 12:21 PM on March 11, 2010 [1 favorite]
If you really want to explore the short sale option MeMail me. I know an agent in the area that absolutely understands the short sale process better than anybody else. She is in Fredericksburg, so I'm not sure she'll work with somebody in Springfield, but it can't hurt to ask.
posted by COD at 12:29 PM on March 11, 2010
posted by COD at 12:29 PM on March 11, 2010
Just as an FYI...we're house hunting in the DC area right now and at least three of the houses we've been interested in have been Wells Fargo short sales, so that probably is an option for you.
As a first time home buyer trying to buy a home in this damn market, I'd advise you to not take this as a sign that Wells Fargo is A-OK with doing short sales. Just because you see a home listed as a short sale does not mean 1. that the seller's bank has any idea the house is on the market; 2. that the homeowner has submitted or even knows what the necessary paperwork is to get a short sale approved; 3. that the bank will approve the short sale at the listed price or any price that the seller accepts and puts under contract.
We currently have one short sale home under contract and have an offer on another, hoping to have that under contract soon. In the first case, the listing said "short-sale pre-approved by bank" but things don't seem to be moving any faster than any other short sale. In fact, because the sellers and listing agent seem to be idiots, it's moving even slower than expected.
Also, it's my understanding that to get a short sale approved by your lender, you typically need to have missed a few payments and have to document your circumstances (i.e. medical bills, ARM that reset at higher payment, or loss of a job) that explain why you can no longer make payments. Wanting to bail because bigger houses are now affordable to you is not typically a reason a bank will approve a short sale.
posted by misskaz at 12:35 PM on March 11, 2010
As a first time home buyer trying to buy a home in this damn market, I'd advise you to not take this as a sign that Wells Fargo is A-OK with doing short sales. Just because you see a home listed as a short sale does not mean 1. that the seller's bank has any idea the house is on the market; 2. that the homeowner has submitted or even knows what the necessary paperwork is to get a short sale approved; 3. that the bank will approve the short sale at the listed price or any price that the seller accepts and puts under contract.
We currently have one short sale home under contract and have an offer on another, hoping to have that under contract soon. In the first case, the listing said "short-sale pre-approved by bank" but things don't seem to be moving any faster than any other short sale. In fact, because the sellers and listing agent seem to be idiots, it's moving even slower than expected.
Also, it's my understanding that to get a short sale approved by your lender, you typically need to have missed a few payments and have to document your circumstances (i.e. medical bills, ARM that reset at higher payment, or loss of a job) that explain why you can no longer make payments. Wanting to bail because bigger houses are now affordable to you is not typically a reason a bank will approve a short sale.
posted by misskaz at 12:35 PM on March 11, 2010
So you're not, in fact, asking how to get a bigger home for your growing family. You're asking how to invest in real estate at a low price when you've already invested in real estate and lost.
Yeah, this is what I came here to say. It sucks to see what looks like a great opportunity slip by, but this looks like a lot of financial risk for uncertain financial gain, with some huge emotional/practical risks.
Meanwhile, you have a home on which you can afford the mortgage in the area in which you want to live. Springfield isn't going to get less desirable in the long run, and the military ain't going anywhere as a source of renters. People will buy your house when you're in a financial position to sell it.
Sorry for your frustration. I knew I wanted to buy a house in my neighborhood for many years while helplessly watching sale prices double several times. It wasn't even truly a bubble -- the perception of the neighborhood was just rapidly catching up to the reality, i.e. the gem beneath everyone's noses finally became obvious. We got a great deal on our house three years ago, but we would have paid half as much if we could've bought five years earlier. Which was just...not...possible. C'est la vie.
posted by desuetude at 12:47 PM on March 11, 2010 [3 favorites]
Yeah, this is what I came here to say. It sucks to see what looks like a great opportunity slip by, but this looks like a lot of financial risk for uncertain financial gain, with some huge emotional/practical risks.
Meanwhile, you have a home on which you can afford the mortgage in the area in which you want to live. Springfield isn't going to get less desirable in the long run, and the military ain't going anywhere as a source of renters. People will buy your house when you're in a financial position to sell it.
Sorry for your frustration. I knew I wanted to buy a house in my neighborhood for many years while helplessly watching sale prices double several times. It wasn't even truly a bubble -- the perception of the neighborhood was just rapidly catching up to the reality, i.e. the gem beneath everyone's noses finally became obvious. We got a great deal on our house three years ago, but we would have paid half as much if we could've bought five years earlier. Which was just...not...possible. C'est la vie.
posted by desuetude at 12:47 PM on March 11, 2010 [3 favorites]
Fozzie, just to clarify: What I'm suggesting is that you start to look much further east, rather than just west and north.
posted by yellowcandy at 12:53 PM on March 11, 2010
posted by yellowcandy at 12:53 PM on March 11, 2010
OP, I would highly recommend anonymizing this post as soon as possible, considering that you have now broadcasted to the Internet:
- that you are a government employee with security clearance
- that you owe more on your house than it's worth
- your name, which is easily googleable and leads to:
- your twitter account
- your family's website
- your address
Prime pickings for someone interested in coercing a government employee to reveal state secrets.
posted by kdar at 1:06 PM on March 11, 2010 [13 favorites]
- that you are a government employee with security clearance
- that you owe more on your house than it's worth
- your name, which is easily googleable and leads to:
- your twitter account
- your family's website
- your address
Prime pickings for someone interested in coercing a government employee to reveal state secrets.
posted by kdar at 1:06 PM on March 11, 2010 [13 favorites]
As someone who struggles with wanting to buy things I don't need simply because I want them and I see (or know of) them, I'm going to suggest that you stop looking at all those other houses. You aren't in a position to buy another house. That's obvious to everyone answering, but it's also obvious to you or you wouldn't really have posted this question. What you are toying with now is jeopardizing your financial well-being for the sake of a desire. Do not convince yourself that this is a good idea.
posted by OmieWise at 1:19 PM on March 11, 2010 [2 favorites]
posted by OmieWise at 1:19 PM on March 11, 2010 [2 favorites]
You should listen to kdar and ask one of the mods to anonymize. For someone with a security clearance, you sure have a ton of information online.
posted by anniecat at 1:29 PM on March 11, 2010
posted by anniecat at 1:29 PM on March 11, 2010
This seems to be a clear case of confusing need with want.
You can afford the payments on your current house so stick with it. You could be a hell of a lot worse off than you are now. In any case, buying a different house because "the price is great!" isn't going to solve your problem, and you seem to think it is. It sounds like you're trying to use the excuse of a growing family to justify a purchase that will 1) Make you feel more successful and 2) Will probably do the same thing that your current house is doing. That is, fall in value.
posted by InsanePenguin at 1:33 PM on March 11, 2010
You can afford the payments on your current house so stick with it. You could be a hell of a lot worse off than you are now. In any case, buying a different house because "the price is great!" isn't going to solve your problem, and you seem to think it is. It sounds like you're trying to use the excuse of a growing family to justify a purchase that will 1) Make you feel more successful and 2) Will probably do the same thing that your current house is doing. That is, fall in value.
posted by InsanePenguin at 1:33 PM on March 11, 2010
From what you've posted, you can't risk more debt - ending up even more underwater than you are now (and that's a very real possibility) will have a negative impact on your security clearance.
I'm leaning towards the options of staying put or rent/rent. Can you rent your current property for enough to cover the mortgage payments and if you can, will you be able to comfortably afford the rent on another property? Do you have financial reserves which would allow you to pay both rent and the mortgage on your existing property if the tenants screw up? Can you afford legally required maintenance on your current property if you rent it out?
If you need a co-signor, then you pretty much cannot afford the thing you're looking at borrowing to buy. Given that you're already underwater on one property, that co-signor would be assuming significant risk.
The second wave of mortgage collapses is already happening here, and it's happening to people who couldn't resist the temptation to enter the housing market when property prices and interest rates bottomed out. Many of those people could barely afford the mortgages they took on when interest rates were rock bottom and have not been able to maintain their payments as interest rates have risen. They don't have a hope in hell of affording the repayments as interest rates rise to "normal" market levels and they don't have enough equity in their homes to sell their properties without taking a substantial loss. And now they're re-entering a very tight rental market. All they've "gained" by becoming homeowners is a whole lot of debt which they didn't have before and more expensive, less desirable rental accommodation than they had before.
The market will bottom out again. Despite all the media hype, the markets bubbles and collapses with monotonous predictability and regularity. I'd work towards being in a strong position to be able to take advantage of the next boom/bust cycle.
posted by Lolie at 1:35 PM on March 11, 2010
I'm leaning towards the options of staying put or rent/rent. Can you rent your current property for enough to cover the mortgage payments and if you can, will you be able to comfortably afford the rent on another property? Do you have financial reserves which would allow you to pay both rent and the mortgage on your existing property if the tenants screw up? Can you afford legally required maintenance on your current property if you rent it out?
If you need a co-signor, then you pretty much cannot afford the thing you're looking at borrowing to buy. Given that you're already underwater on one property, that co-signor would be assuming significant risk.
The second wave of mortgage collapses is already happening here, and it's happening to people who couldn't resist the temptation to enter the housing market when property prices and interest rates bottomed out. Many of those people could barely afford the mortgages they took on when interest rates were rock bottom and have not been able to maintain their payments as interest rates have risen. They don't have a hope in hell of affording the repayments as interest rates rise to "normal" market levels and they don't have enough equity in their homes to sell their properties without taking a substantial loss. And now they're re-entering a very tight rental market. All they've "gained" by becoming homeowners is a whole lot of debt which they didn't have before and more expensive, less desirable rental accommodation than they had before.
The market will bottom out again. Despite all the media hype, the markets bubbles and collapses with monotonous predictability and regularity. I'd work towards being in a strong position to be able to take advantage of the next boom/bust cycle.
posted by Lolie at 1:35 PM on March 11, 2010
This was touched on once already but I'll mention it again because it wasn't one of your stated options: is it at all possible to renovate your current home? A modest addition could cost less than your commission fees and moving expenses. Converting a garage to a master bedroom or combination kids bedrooms and playroom could be easily done for a few thousand dollars.
posted by Mitheral at 3:40 PM on March 11, 2010
posted by Mitheral at 3:40 PM on March 11, 2010
You have a house that is currently worth $275K. The houses you would like to own are currently worth $275-$300K. You are worried that those houses will not be affordable to you in the future. Unless there is some additional information that we don't know about, it seems reasonable to assume that when those houses are worth $400-$430K, your house will be worth $400K. If that time comes, then you can sell your house and buy one of the houses you desire.
Right now, given your conditions, you have no way to trade your house for the house you desire, unless you can somehow otherwise come up with $100K+. Buying another house and keeping your current house greatly increases your risk. You are already underwater on your current home; now is not the time to make a risky purchase.
posted by ssg at 3:40 PM on March 11, 2010 [1 favorite]
Right now, given your conditions, you have no way to trade your house for the house you desire, unless you can somehow otherwise come up with $100K+. Buying another house and keeping your current house greatly increases your risk. You are already underwater on your current home; now is not the time to make a risky purchase.
posted by ssg at 3:40 PM on March 11, 2010 [1 favorite]
Are you sure you can't get a mortgage for a new home while keeping the old one and renting it? I'd talk to a lender and at least see what your options are. The DC metro area is in a lot better shape than other areas of the country. I don't think it would be crazy to buy now and rent out the old place for a few years. If you can make the cash flow work.
posted by selfmedicating at 5:41 PM on March 11, 2010
posted by selfmedicating at 5:41 PM on March 11, 2010
Best answer: I'm surprised at how negative this thread is. You want to move? Well, God bless America -- give it a try!
It does sound like the short sale option is really out, because the credit impact would likely mean you couldn't buy again right away anyway.
The rent and rent option would be the easiest. I'm assuming there wouldn't be more than a $800 differential between the rent you'd receive for your 2BR and the rent you'd pay out for a 3BR in a nicer neighborhood? Can you afford that difference? (Do you want to?)
What does the math look like for your ability to qualify for a loan to buy a new place while renting out this current one? A lot of people do have a primary residence and an income property. You may be able to count 75% of your projected rent as income. (Since we've all now realized just how risky real estate can be, I personally wouldn't drag a cosignor into it.)
Good luck.
posted by salvia at 6:06 PM on March 11, 2010
It does sound like the short sale option is really out, because the credit impact would likely mean you couldn't buy again right away anyway.
The rent and rent option would be the easiest. I'm assuming there wouldn't be more than a $800 differential between the rent you'd receive for your 2BR and the rent you'd pay out for a 3BR in a nicer neighborhood? Can you afford that difference? (Do you want to?)
What does the math look like for your ability to qualify for a loan to buy a new place while renting out this current one? A lot of people do have a primary residence and an income property. You may be able to count 75% of your projected rent as income. (Since we've all now realized just how risky real estate can be, I personally wouldn't drag a cosignor into it.)
Good luck.
posted by salvia at 6:06 PM on March 11, 2010
Oh, also, I personally wouldn't move way out into the rural areas. If you do, factor in rising gas prices!
posted by salvia at 6:07 PM on March 11, 2010
posted by salvia at 6:07 PM on March 11, 2010
I'm surprised at how negative this thread is.
Yeah, you'd almost think that people were responding in the context of a recession set off by the bursting of a housing bubble.
posted by holgate at 6:22 PM on March 11, 2010 [8 favorites]
Yeah, you'd almost think that people were responding in the context of a recession set off by the bursting of a housing bubble.
posted by holgate at 6:22 PM on March 11, 2010 [8 favorites]
Building on what ssg said:
You worry that by the time your house's value gets above water, that the houses you are interested will no longer be affordable. Economically this only makes sense if you believe that for some reason the houses you are interested in are likely to appreciate in price faster than the house you already own. This might be the case, but in general I would expect all the houses in the area to increase in price at about the same rate.
If this is true then you don't need to worry about the prices increasing, since the house you own helps hedge against that risk (since you will be able to sell it for more as well).
Even if the other houses' prices grow slightly faster, the cost to you is only the appreciation of that house relative to your own, not the entire increase in value. It is unlikely that the transaction costs and inefficiencies of underwater selling/renting your house in a downturned market would outweigh what you'll lose by not buying the new house right now.
posted by vegetableagony at 6:32 PM on March 11, 2010 [1 favorite]
You worry that by the time your house's value gets above water, that the houses you are interested will no longer be affordable. Economically this only makes sense if you believe that for some reason the houses you are interested in are likely to appreciate in price faster than the house you already own. This might be the case, but in general I would expect all the houses in the area to increase in price at about the same rate.
If this is true then you don't need to worry about the prices increasing, since the house you own helps hedge against that risk (since you will be able to sell it for more as well).
Even if the other houses' prices grow slightly faster, the cost to you is only the appreciation of that house relative to your own, not the entire increase in value. It is unlikely that the transaction costs and inefficiencies of underwater selling/renting your house in a downturned market would outweigh what you'll lose by not buying the new house right now.
posted by vegetableagony at 6:32 PM on March 11, 2010 [1 favorite]
Also, don't forget, if you rent and rent, you'lll be paying maintenance costs for both houses, homeowner's insurance on one and renter's insurance on the other. Also, I don't know if your house will get a thorough beating being rented by people who might not otherwise take care of your house as you would. So there's that.
posted by anniecat at 8:19 PM on March 11, 2010
posted by anniecat at 8:19 PM on March 11, 2010
I would also suggest escaping the mentality that this is "no fault of [your] own". You bought the house. It was a bad decision, but it was your decision, and the current problem is entirely of your own making. Which sucks, yeah, but it's something to think about--otherwise you're setting yourself up to have the exact same thing happen with another house.
Presumably, when you bought this house, you thought that it was a nice house, a good investment...probably a lot of the same things that you're thinking about these other houses that you're looking at now. At this point, I don't think that any real estate is a good investment, because those houses that are nice and affordable and good investments are going to be next week's nice, but overpriced and unlikely to appreciate in the next twenty or thirty years.
You've already made this mistake once--you don't want to do it again.
posted by MeghanC at 8:28 PM on March 11, 2010 [4 favorites]
Presumably, when you bought this house, you thought that it was a nice house, a good investment...probably a lot of the same things that you're thinking about these other houses that you're looking at now. At this point, I don't think that any real estate is a good investment, because those houses that are nice and affordable and good investments are going to be next week's nice, but overpriced and unlikely to appreciate in the next twenty or thirty years.
You've already made this mistake once--you don't want to do it again.
posted by MeghanC at 8:28 PM on March 11, 2010 [4 favorites]
Yeah, you'd almost think that people were responding in the context of a recession set off by the bursting of a housing bubble.
Oh right, the one that was caused by bad, bad people who wanted to move to a slightly bigger house in a slightly nicer neighborhood? I forgot about how their badness was right at the heart of our macroeconomic problems.
posted by salvia at 10:06 PM on March 11, 2010
Oh right, the one that was caused by bad, bad people who wanted to move to a slightly bigger house in a slightly nicer neighborhood? I forgot about how their badness was right at the heart of our macroeconomic problems.
posted by salvia at 10:06 PM on March 11, 2010
I forgot about how their badness was right at the heart of our macroeconomic problems.
Their "badness" was their self-indulgence and sense of entitlement. The same self-indulgence that the OP feels (We NEED a bigger house/bigger car because we have kids) instead of making due, as well as the sense of feeling screwed because they decided to buy property at the height of the bubble, so it's not their fault. And in a way, it's not. Information is imperfect. But throughout 2003-2006, it was obvious that it was being called a housing bubble.
OP, it's difficult to live in an area where there are so many luxury cars, so many McMansions, so many people who seem ridiculously wealthy. Keep your head and don't get too caught up in getting it all now. Your smaller townhome home is probably more energy efficient and will save you money. And then your kids will be grateful for how you saved so much money.
posted by anniecat at 8:25 AM on March 12, 2010
Their "badness" was their self-indulgence and sense of entitlement. The same self-indulgence that the OP feels (We NEED a bigger house/bigger car because we have kids) instead of making due, as well as the sense of feeling screwed because they decided to buy property at the height of the bubble, so it's not their fault. And in a way, it's not. Information is imperfect. But throughout 2003-2006, it was obvious that it was being called a housing bubble.
OP, it's difficult to live in an area where there are so many luxury cars, so many McMansions, so many people who seem ridiculously wealthy. Keep your head and don't get too caught up in getting it all now. Your smaller townhome home is probably more energy efficient and will save you money. And then your kids will be grateful for how you saved so much money.
posted by anniecat at 8:25 AM on March 12, 2010
This is heading towards MeTa territory, but I'm the last to blame "bad, bad people" for a situation where house prices got out of whack with wages, and the only way to get onto the property ladder was to buy at inflated prices.
Collectively, though, when everyone wants a pony, and the people with ponies want nicer ponies in bigger fields, and helpful people are offering no-money-down, interest-only payments on your pony and converting pony loans into highly-leveraged mezzanine-tranched pony-backed-securities, there comes a time to say: no, you can't have that pony.
posted by holgate at 8:49 AM on March 12, 2010 [1 favorite]
Collectively, though, when everyone wants a pony, and the people with ponies want nicer ponies in bigger fields, and helpful people are offering no-money-down, interest-only payments on your pony and converting pony loans into highly-leveraged mezzanine-tranched pony-backed-securities, there comes a time to say: no, you can't have that pony.
posted by holgate at 8:49 AM on March 12, 2010 [1 favorite]
I guess it's just surprising to me that this was the only time that self-indulgence and a sense of entitlement caused a housing crash that nearly destroyed the economy. I mean, I didn't think human nature had changed all that much.
I guess if you believe self-indulgence is a recent phenomenon and itself what caused the whole situation, then it would make sense to go on blaming individuals like the OP. (I disagree, obviously.)
posted by salvia at 8:16 PM on March 12, 2010
I guess if you believe self-indulgence is a recent phenomenon and itself what caused the whole situation, then it would make sense to go on blaming individuals like the OP. (I disagree, obviously.)
posted by salvia at 8:16 PM on March 12, 2010
I wouldn't cite Eliot Spitzer on monogamy, but I'll point to his thoughts on the cumulative effect of individual instances of over-reach: search down for "systemic risk". salvia: I don't consider over-reach to be the same as overindulgence, so either stop putting words into my mouth or take it to MeTa.
posted by holgate at 10:31 PM on March 12, 2010
posted by holgate at 10:31 PM on March 12, 2010
I am feeling bad about doing this in AskMe and don't feel the need for a Meta thread, so maybe we should continue the discussion in the next housing thread on the blue. The World Famous, your point about impacts on the individuals is a really good point, if that's the cause of the negativity.
holgate, no need, I was using anniecat's words, not mischaracterzing yours.
posted by salvia at 10:03 AM on March 13, 2010
holgate, no need, I was using anniecat's words, not mischaracterzing yours.
posted by salvia at 10:03 AM on March 13, 2010
This thread is closed to new comments.
posted by cooker girl at 11:33 AM on March 11, 2010 [7 favorites]