According to Zillow, U.S. homes will lose a total of $1.7 trillion in value in 2010. The value lost this year will be 63% more than in 2009, and will take the total value lost since June 2006 to more than $9 trillion.
For the past couple of months, Steve and I have been weighing the pros and cons of moving to another town. We have several concerns about our town, but our largest concern is the local school system. Ian, who is shipped to another school district because of his special needs, is doing just fine. Jonah isn't challenged enough. (He's midway through 6th grade, and he hasn't written anything longer than a greeting card.) We might stay and supplement his education with outside services. However, it might be easier to move. It's certainly not worth my effort to change the system on my own.
So, I've been talking to real estate agents and checking out homes in other towns. If we sell our home right now, we'll lose some money. We had to invest a lot of money to keep the house standing up, and we won't get all of it back. On the other hand, we can buy a home that would have been unthinkably expensive four years ago. We might even come out ahead. I'm going through online listings, and I'm finding homes that have already been emptied out of possessions. Owners have reduced their asking prices three or four times.
I know other parts of the country went through this trauma last year, but it's really just hitting our corner of the country right now.
For new buyers, this is a great development. Housing prices were completely insane a few years ago, and a few lucky friends were able to buy very nice homes this year. For others, the housing market is devastating. The online listings frequently talk about bank ownership and short sales.
Others aren't investing in their homes anymore. Why bother putting a new bathroom on your house, if you can't recoup some of the costs when you move? I think people aren't even cleaning up their yards as much anymore, because they've grown to hate their homes. They are no longer seen as an investment; instead, they are a burden. Remember: a home without equity is just a lot of debt.
Rumor has it that housing prices are going to go down even further in the spring, especially if the economy takes another downturn. It's strange to think that just a few years ago, when we were looking for a home, there were lines of people waiting to buy little Cape Cods by the side of the railroad tracks. Those homes had mulitple bids and went $100,000 over asking price. Irrational exuberance and all that.
Apt. 11d 
Have you looked into any parochial schools in your area? It may be a wash when you compare (tuition + your present mortgage + taxes) to (the new mortgage + costs associated with moving + new taxes.) Also, if you move from your current town, will Ian’s current placement be in jeopardy? It may be cheaper to stay in place for the next 6 years, and supplement or go private.
In our state, the “sending” district is responsible for Sped costs for the first year after a family change towns, if the move happens after a certain date in the preceding year. After that, the new town is responsible.
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Others aren’t investing in their homes anymore. Why bother putting a new bathroom on your house, if you can’t recoup some of the costs when you move?
Because you want a nicer bathroom, and will get enough pleasure out of it to make it worth it? Even at the height of the housing market, most things I saw indicated that only a few “improvements” to a house earned money for those making them. Unless you are in real estate as a business, I’d think that making changes for any reason other than that it would make you happier is probably foolish.
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“Those homes had mulitple bids and went $100,000 over asking price. Irrational exuberance and all that.”
Other people’s money–it’s not the root of all evil, but it’s the root of a lot of evil.
For homebuyers’ reference, here’s a version of the Credit Suisse ARM reset chart showing that resets will continue en masse up until the end of 2012:
http://www.calculatedriskblog.com/2010/03/new-credit-suisse-arm-recast-chart.html
Presumably, that means that home prices will continue to drift downward at least until then (barring inflation, etc.).
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Sara and I just completed a 2-year-long renovation project on our house here in Austin. One of the things that the housing crash taught us was that there was really no point making changes for “resale value” — designing around the aesthetic of some hypothetical purchaser instead of what we liked ourselves. As a result, we did a lot of idiosyncratic touches, abbetted by the community at her blog.
So I wonder if–while the kinds of renovations done during the bubble were cookie-cutter flipper face-lifts–the kinds of renovation work we see now will trend towards the quirky?
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I think the mortgage reset bomb has been pretty much defused. Mortgage rates are staying low and huge numbers of people with ARMs went under well before the rate was reset. The people with those teaser rate mortgages and 1% down payments were more likely to become unemployed or have other issues.
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the kinds of renovation work we see now will trend towards the quirky?
The Pittsburgh real estate market was basically stagnant (or declining) in real terms right up until ten years ago or so. You would see a lot of renovation work that would charitably be called quirky. Uncharitably, I’d have to restrain myself from wondering why there is a whirlpool tub in the bathroom off the dining room, if they had ever thought that it might be nice to install a banister, and if it is even legal to advertise something as a “bedroom” when the ceiling is 6 feet high.
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We’ve every intention of staying in this house until they roll us out. Hence, the choice to paint the dining room/living room in Fudge Truffle (medium brown) and hallways in Peanut Butter (somewhat lighter brown). The Designed to Sell people would frown, but it makes us happy.
I never saw the vital necessity of stainless steel appliances, granite countertops and vessel sinks for every single house out there. But then, we’re still living with an 80s kitchen and no reno budget anytime soon (what renovations we get are more in the line of maintenance like the new roof).
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We’re in this house forever, so we’ll likely finish the basement in a year or two, even though our house has dropped by almost $100K since we bought it. But we want it finished, so the inability to recoup means nothing to us.
If I were in your position, my biggest concern would be selling your current home. Can you price it really, really competitively in this market? If I were trying to sell a home today, I don’t think I’d even go house-hunting unless I had a contract for sale on my current home. And even then, given the number of people who then can’t sell their own homes, or don’t qualify for the mortgage they were hoping to get, I’d feel queasy.
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“I think the mortgage reset bomb has been pretty much defused.”
As of February of this year, Credit Suisse was saying that there are still a trillion dollars in mortgages left to reset. I somehow can’t find a Credit Suisse chart that goes back before 2009 right now, but as I recall, we have been in a valley between the resetting of subprime and the resetting of Alt-A.
http://www.snl.com/interactivex/article.aspx?CDID=A-10770380-12086
On top of that, I keep hearing about people who have been living in a house without paying a mortgage for one, two or even three years without being foreclosed on. The banks have also been very slow about selling homes ones they actually foreclose.
Taking all this into account, I think it will take a very long time for the housing market to achieve a healthy equilibrium. As of April, the WSJ said there were 103 months of foreclosures and likely foreclosures in the system.
http://blogs.wsj.com/economics/2010/04/24/number-of-the-week-103-months-to-clear-housing-inventory/
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We sold our house this summer and are now renting, and I feel lucky. We sold it at $30K more than Zillow says it’s worth now, got every dime out of it (and a little more) than we ever put into it. We’re renting a really nice house at a pretty low rent for the great neighborhood we’re in. In 2 years my husband should be back at work again, and maybe we’ll buy again.
Or maybe we won’t. When the roof leaks, it’s not our problem. We’re much more flexible if life throws us curves as renters. Tor all the craziness of the last three years (job loss, long term unemployment, etc.), I’ve learned some great lessons- like I’m damned happy not to be tied to a mortgage right now
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Laura-
Which other towns are you interested in and how do you know they’d provide more challenge? -Tanya (a current WaHi resident considering moving to Essex or Bergen counties for the sake of schools)
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I’m with Ben and Janice: this is our pine box house, and we are doing exactly what we want, and only if it makes the place fit our needs better. We are only slightly worried about our kids’ success in selling the place after we have been carried out.
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Let me go back and answer some questions.
Cranberry — Yes, Ian’s situation complicates matters enormously. Four of the five towns that we’re looking at send kids to Ian’s current school, so his placement wouldn’t change at all. I’m trying to research the fifth town, but it’s difficult. Towns don’t like to publicize their offerings for special ed kids, because they don’t want people like us moving to their town. We’re trying to figure it out. Catholic school for two years, until we’re ready for the well regarded high school is an option.
Tanya – We’re looking at the N*rth*rn V*ll*y school districts and R*dg*w**d. Here’s the latest rankings of school districts in the NJ.
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I’m guessing (because it has Camden at the bottom) that the list in the link is exhaustive and that NJ has 322 public high schools. Those must be some big schools. The kids have to paint themselves orange and do 6,000 crunches a day just to try to stand out.
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Laura- I don’t know much about the former but I do about the latter because I grew up there and now spend one-two days a week there with my wee ones at Grandma’s house. Here are my two cents, if i may…
I love the pool, the Y, the library, the hospital, and yes I had a good education. I feel we could choose to live there (and put up with the ridiculous traffic), in a heartbeat. But I do have a concern about community. Sometimes I feel that it’s become more competitive and more about consumerism than when I lived there in the 80s. (It was already nauseating back then). This can vary wildly depending on the neighborhood, even the block. And did you notice two NYT pieces made mention of this town when describing school districts with severe problems with bullying and technology this year? (Texting and Facebook). On the upside, concerned parents and administrators were addressing the problems. Any thoughts? Sorry if this veered too far off-topic…
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Yes, Tanya, I have most of the same concerns.
The bullying is happening in every town. It’s happening here. Em*rson was just massively sued, because the courts found that they weren’t doing enough to stop bullying. A kid in our town was bullied so badly that he brought a gun into the high school with the plans of killing himself in the cafeteria.
The competition and the materialism is another story. That scares me to death about that town. I grew up in T*n*fly, so I know all about that. I don’t like being around that shit and I don’t want my kids near it either. For all the problems with this town, the kids aren’t spoiled. They are polite. They don’t get whatever they want. They don’t treat adults like servants. They don’t read a lot, but they are smart. I really like Jonah’s friends.
That’s why we haven’t made a final decision yet. We might gain some things, but we’ll lose other things.
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