The current housing market malaise has some homeowners up in arms. Sure, if you’re trying to sell your home to get out of financial difficulties, or because you’ve already bought another place and carrying two mortgages is killing you financially, I can understand why you’re not happy.
What doesn’t make much sense to me are the dozens of readers who are ready to hand over their property to the lenders simply because their home doesn’t work for them anymore.
Where did these folks get the idea that homes are like disposable consumer goods? When they break, you throw them out. In a matter of minutes, you can get rid of the old and buy something new.
Real estate is what investment advisors call an “illiquid” investment. Historically, it hasn’t been that easy to sell a house on a whim. It took planning, patience and a large dose of ibuprofen to get you through the long months or years (sometimes) without an offer.
But in the past 15 years, since the early 1990s, homeowners have been able to sell their homes almost on demand, and certainly within a few weeks or months. An entire generation of real estate agents has never known a time like this one, where homes just sit, and sit, and sit.
If you can’t sell your home, the natural inclination is to find another way to get rid of it. I understand the feeling. If you hate your car and your dealer doesn’t give you a good enough offer, you can try another dealer. Eventually, when 10 dealers tell you your car is only worth $17,000 and not the $20,000 you owe on the loan, you’ll have to make a decision: cough up $3,000 in cash, buy a new car and roll over what’s left of your loan onto the new larger loan (so you’re immediately underwater on your new car) or find a way to keep the car for another few years until you’ve paid off a larger portion of your loan.
Why aren’t more homeowners simply doing the same thing with their house? Why complain about how unhappy you are instead of learning how to love the house you bought and now own (at least for another few years)?
After World War II, home builders put up 1,200 square foot, three-bedroom houses with one bathroom. Soldiers and their wives moved into these suburban residences and raised their families. These homes weren’t considered “too small.” It’s what everyone had.
Today, a 1,200 square foot condo might contain two bedrooms – or just one. You might have two bathrooms, or a bath and a half. The typical new home has around 2,400 square feet, central air, an attached two car garage, several bedrooms and bathrooms, and a built out attic or basement.
My friend, Fred, has been raising his twins in an older 1,200 square foot house. The house is too small, he says, and they feel on top of each other all the time. They tried to sell the house, but there wasn’t any interest.
So, he and his wife have learned to love what they can about the house, including the neighbors, with whom they’ve grown quite close. And, the house is affordable. Even if they could sell (Fred still thinks the market is too soft in their neighborhood), they probably wouldn’t. Their mindset has changed.
Sometimes our brains need a little tweaking. As we keep learning, investments like real estate don’t always rise in value. It’s difficult to find, fix, and flip a house and clear $60,000 in a few months, no matter what you see on television infomercials.
If you turn over your property to your lender, it will have a severely negative impact on your credit history and credit score. If you’re foreclosed upon, it may take years before any lender is willing to grant you a mortgage to buy another property.
So if you can figure out a way to love the house you’re in, at least until the time you can sell it or rent it, you’ll be a lot happier.