4 ms·

I bought a house in the Chicago suburbs in August 2007 for $275k. I short sold it 4 years later for $115k. It sold 2 years ago (13 years afer I bought it) for $

I bought a house in the Chicago suburbs in August 2007 for $275k. I short sold it 4 years later for $115k. It sold 2 years ago (13 years afer I bought it) for $210k. "Eventually" is doing a lot of work in your comment.

mywittyname 4y ago
People seem to look at aggregate housing, and pretend that every buyer's experience will be "about average". Buying a house is akin to putting your retirement into the stock of a single company. In that situation, it doesn't matter what the S&P500 tends to do on a long enough timeline.
supertrope 4y ago
Which is why buying a house should be considered consumption. It's to own a residence. Asset appreciation in real estate is a very long game and is not guaranteed. Strategic default will wreck your credit.
lotsofpulp 4y ago
Chicago metro real estate is unique in its price changes due to outlier amounts of debt for state and local governments. Both Chicago and IL are multiple standard deviations above the norm for projected tax liabilities, so accounting for that reduces the amount people pay for the real estate.
Sohcahtoa82 4y ago
Really, I think I'm making three incorrect assumptions: 1. People that buy a house will stay in it for 10+ years. This assumption being wrong means you're more likely to be affected by market swings. 2. Market swings won't be massively significant, for some definition of "massive", and I consider 275k -> 115k massive. Meanwhile, the Z-estimate of my house peaked at $618K this April, and is now at $561K. I would not consider that one massive. 3. That people stopping making payments because it's underwater, and not some extenuating circumstance, like losing your job and being unable to afford payments, or having a need to relocate that is unrelated to your home being underwater. But it's #3 that really gets me. I fail to understand the "My mortgage is underwater" -> "I should stop making payments" logic jump. I think it's because I do not see my house as investment or even an "asset". It's my HOME. I agreed to pay $338K in 2015 to have a HOME. If there was a real estate crash immediately afterwards and I was underwater, my only regret would be that I could have bought the house cheaper if I had waited a little longer. I would not in any way feel incentivized to stop making payments and walk away, because not only would that mean I would still owe the bank money, but I wouldn't have a home and my credit would be destroyed, making it hard to get another mortgage.
- pchristensen 4y ago
  With taxes, mortgage, and maintenance, I was paying about $1k/mo more than I would have paid for comparable rent. We stayed, watching our house fall in value for over 3 years. Housing is housing, but it's also an investment, and paying $12k extra every year on an asset that would take decades to break even isn't smart. We took the option that was available to us. FWIW, the credit impact wasn't bad, because so many people defaulted on loans in that period so there was a lot of grace given. That being said, I don't expect 2022-23 to be like 2008-10 for housing.

mywittyname 4y ago

People seem to look at aggregate housing, and pretend that every buyer's experience will be "about average". Buying a house is akin to putting your retirement into the stock of a single company. In that situation, it doesn't matter what the S&P500 tends to do on a long enough timeline.

supertrope 4y ago

Which is why buying a house should be considered consumption. It's to own a residence. Asset appreciation in real estate is a very long game and is not guaranteed. Strategic default will wreck your credit.

lotsofpulp 4y ago

Chicago metro real estate is unique in its price changes due to outlier amounts of debt for state and local governments. Both Chicago and IL are multiple standard deviations above the norm for projected tax liabilities, so accounting for that reduces the amount people pay for the real estate.

Sohcahtoa82 4y ago

Really, I think I'm making three incorrect assumptions: 1. People that buy a house will stay in it for 10+ years. This assumption being wrong means you're more likely to be affected by market swings. 2. Market swings won't be massively significant, for some definition of "massive", and I consider 275k -> 115k massive. Meanwhile, the Z-estimate of my house peaked at $618K this April, and is now at $561K. I would not consider that one massive. 3. That people stopping making payments because it's underwater, and not some extenuating circumstance, like losing your job and being unable to afford payments, or having a need to relocate that is unrelated to your home being underwater. But it's #3 that really gets me. I fail to understand the "My mortgage is underwater" -> "I should stop making payments" logic jump. I think it's because I do not see my house as investment or even an "asset". It's my HOME. I agreed to pay $338K in 2015 to have a HOME. If there was a real estate crash immediately afterwards and I was underwater, my only regret would be that I could have bought the house cheaper if I had waited a little longer. I would not in any way feel incentivized to stop making payments and walk away, because not only would that mean I would still owe the bank money, but I wouldn't have a home and my credit would be destroyed, making it hard to get another mortgage.

pchristensen 4y ago
With taxes, mortgage, and maintenance, I was paying about $1k/mo more than I would have paid for comparable rent. We stayed, watching our house fall in value for over 3 years. Housing is housing, but it's also an investment, and paying $12k extra every year on an asset that would take decades to break even isn't smart. We took the option that was available to us. FWIW, the credit impact wasn't bad, because so many people defaulted on loans in that period so there was a lot of grace given. That being said, I don't expect 2022-23 to be like 2008-10 for housing.