So I’ve participated in more than a few housing bubble threads here. But as we all probably know (and if you haven’t heard, just spend an hour reading thehousingbubbleblog.com and be educated), the housing bubble is crashing, and crashing bigtime.
The short story is very simple: it’s this chart (from page 8 of this report) showing that all the subprime mortgage resets that have happened so far – causing major foreclosures, plummeting property values, and bank losses – are just the tip of the iceberg, and that the wave of them will continue through 2011.
So. My wife and I bought our house in Concord, CA in November of 2002. We paid $385,000, which was in line with the rapidly spiking market – previous sale was a year prior for $340,000. We probably overpaid, but not by too much.
According to Zillow (which isn’t worth much but at least has trend lines), our valuation topped out at about $600K right in mid-2006 or so. However, we were working on getting pregnant and I was in the middle of a big work crunch and we didn’t do as my wife suggested at the time and sell at the peak. Sigh, wave bye-bye to that $120K we could’ve made off the bubble…
Now Zillow estimates our house is worth about $500K. Almost a 20% drop in a year and a half. And my firm expectation is that over the next year it will drop to almost $400K, and that two years from now it’ll be worth about $350K, or less than what we paid for it. By 2011 I wouldn’t be at all surprised if prices were all the way back to 2000 levels, or around $320K for that house.
So we’re fucking selling it. Yep, we’re moving out. We’re going to do our best to get about $450K - $470K for it. Fortunately, we were somewhat intelligent and we didn’t refinance – we had a 90/10/10 financing originally, and we’ve put some extra money into paying down the mortgages, so we owe a total of about $310K on it now.
If we can get $450K for it, then – minus the $30K agent’s fee and the $20K we’re spending to remodel it in order to make it sellable in this market – we’ll clear about $90K. Since we’ve put about $70K in cash into it (not including the marginal principal from mortgage payments), that means we’ll have cleared $20K in profit over five years, or about 30% profit. That’s about 5% a year. Not great, but a hell of a lot better than losing everything and then some.
We’ll then be able to put that $90K into a 23% down payment on a new $400K house… around 2011, when the market bottoms out.
I told the realtor and my wife that they can’t let me anywhere near the buyers, because my main feeling in life right now is GET OUT OF THE HOUSING MARKET, which is obviously the last thing we want our buyers to think :-\
So. Any of you looking at the housing market and deciding to sell while you can still get a down payment out of your house? Anyone else putting their money where their mouth is?