Tuesday, January 19, 2010

Soapbox: Housing Market

I miss my soapbox.

Luckily, there has been a hot button issue for me that I feel like I can vent about in this blog while also putting out some helpful tips.

So here we go...

Let me start by saying that I am officially hooked on HGTV. I never used to watch it before - but after being sick as a dog on New Year's Eve, I got drawn into an all-day marathon of "House Hunters." I swear I watched at least 20 episodes. Sick, I know.

So now I've moved beyond "House Hunters" and started watching other HGTV shows... including a few on first-time home buyers - like "Property Virgins." While watching these shows, I'm overcome with the amount of stupidity with some of these people.

For instance, this one couple the other week had ZERO money in savings, wanted 100% financing (which pretty much doesn't exist anymore... and for good reason, as far as I'm concerned), and were looking at $350k homes. When they found a loan that only required they put $9k down, they said they couldn't afford that. What?! You don't have $9,000 to put down on a home, but you think you're good with the mortgage payments (and taxes and escrow and electricity bills, etc.) on a $350,000 home? Their thought was that the wife was about to start a new job, and they'd be able to afford a house that expensive once she started the job... but in the meantime they had no money.

Ridiculous. The thing about our world is that nothing is certain - that job could fall through, her husband could get laid off, etc. - and they're stuck in a $350k home with no savings. Bad move.

Lesson #1: Don't buy a house without savings that could get you through at least a few months without employment.

Another episode I watched last night included a woman that didn't want to pay more than $1,000 a month in mortgage (because she had an $800/month lease on her Mercedes, duh!) - but still wanted a house that was brand new, granite countertops, hardwoods, new everything, etc. That poor Realtor on the show looked like she wanted to backslap this woman. I know if I were in her shoes, I'd want to do the same.

Lesson #2: Have realistic expectations. Your first house will probably not be your dream house (ours certainely wasn't) - and that's okay! Buy what you can afford. Most of the time your first home is your starter home... so try to get something that you can live with but will also allow to save $$ for the next home.

Lesson #3: Please don't spend $800/mo. on a car lease unless you hate money and want to get rid of it as quickly as possible.

I remember at the beginning of the housing crisis reading a story on MSNBC about people who had to default on their loans. I literally was spitting fire at the end of the article.

One woman - a hairdresser - was living (by herself) in a $500k home. Her salary was about $35,000 a year. And SHE felt WRONGED ---- that she got taken for a loop on how much house she can afford.

I wish she had some tips from me like...

Lesson #4: If your monthly paycheck is less than your monthly mortgage - YOU CANNOT AFFORD THE HOUSE... even if some idiot lender tells you that you can.

During the whole housing market crash, many people blamed the lenders for offering people these outrageous loans that they could not possibly afford. I understand that to some extent - and we definitely need safeguards in place for "stupid" - but I'm sorry, why is there no such thing as personal responsibility any more?!?! If people cannot put two and two together... such as "Uhhh... my paycheck is only $1,500 a month... so maybe I can't afford a mortgage payment of $3,500 a month!" - than that is their own problem that they need to solve on their own.

I'm sorry but it is infuriating to be a responsible home buyer - to actually sit down and think "Okay - this is how much savings we have. Here are our monthly expenses. Hm, lets take into account that something could happen to one of our cars. Let's consider how it would be impacted if one... or horror... both of us lose a job. How much do we want to continue putting in savings/retirement? How much house can we afford with all that said and done - and still feel financially comfortable?"

Now, I know there were some people during the housing crisis that were unfortunately victims of bad luck. Couples - who despite having savings and sensible house payments - that lost their jobs, came into medical expenses, were unable to get back on their feet - and thus, lost their home. That is understandable. You cannot predict everything that may happen. But you can try to be as prepared for that as possible.

My frustration is how it seems that we're overlooking the personal responsibility in this equation - and going straight to "Bad lenders! How could you!" I'm sorry but there are enough FREE resources out there for people who need guidance when it comes to something as complicated as buying a house. I just think excusing or rewarding "stupid" - creates a group of people that are not only crippling the economy, but sadly, crippling themselves.

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