Dream House or Nightmare?

For years Americans custom-built homes with pricey extras expecting high returns on their investment. They're in for a letdown.

By Daniel McGinn | Newsweek Web Exclusive
Oct 16, 2007

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  • Posted By: woody_alan @ 11/19/2007 2:52:44 AM

    *** ur house, and *** ur couch too bittch....i cant sell mine either, *** my house, i'm losing money and sleep, i shet on this market...

  • Posted By: rogerally @ 11/08/2007 1:03:25 PM

    Any buyers? At 35k below market, I'll sell for $715. Live here worry free. rogerally@comcast.net

  • Posted By: Paul_S @ 11/06/2007 2:37:36 PM

    The vast majority of homes in the United States are already priced at or near historic averages of two and a half times median income. I believe in the dream of home ownership, but I think much of the disappointment around high median home prices centers around areas most people simply do not qualify to live.

    The promise of home ownership doesn't mean beach home, luxury condo, or 10,000 square feet on100 acres in Charlottesville, VA. Bottom line is housing is priced about right. It's time for people in highly desireable locations to adjust their expectations, and possibly relocate to places they qualify to live in.

  • Posted By: skibo63 @ 10/29/2007 12:35:48 PM

    I don't wish anyone finanical ill, but I hope to see housing prices continue to drop until they return to historic averages (2.5 median income). Median income is essentially unchanged over the past few years and yet housing prices have risen by 1/3 - I don't know why anyone thinks this is a healthy development. A few make out, but the rest of us end up spending a larger portion of our income on housing, which just throws our work/life balance further out of whack than it already is. Ridiculous commutes, slavery to the Blackberry, new mothers who can't afford to take more than a few weeks off are just a few of the social ills that are due, at least in part, to the way we have auctioned up housing prices to unheard of levels.

  • Posted By: rhmoco @ 10/27/2007 10:55:07 AM

    Rogerally, I've been watching and reading the circus of comments you received since this article posted on msn.com a week or so ago. And I must say, that you've received a lot of scrutiny, and some support, from this article. I???m sure you weren???t looking for either.

    People judging you and being mean to someone (you) they don't even know is not surprising, but the amount of people who wrote ???mean??? and ???empty??? things is a bit surprising. I've been told that if you don't have anything nice to say, don't say anything at all, you know, display a little respect and class! But I guess given a forum such as ???post your comments???, people who normally don???t say anything mean, have a private forum where they can attack strangers online. I guess we all need an outlet!

    Nevertheless, I'll say that I understand your perspective and your objectives. I???m interested to see how the market changes over the next few years. I???ve got several houses out there that I hope will increase in value (all rental houses though). Hopefully, for us that know how to leverage property for investment purposes, we???ll come out on with a few more dollars in bank. Frankly, everyone who buys a home and opts not to rent is doing so for investment or tax purposes. The might mighty dollar??? and whether we want to admit it or now??? we are all driven by the might mighty dollar in some capacity or another.

  • Posted By: rogerally @ 10/26/2007 6:36:18 PM

    We only own one home.

  • Posted By: tomflanigan @ 10/24/2007 6:29:16 PM

    Well, Boo Hoo for the Elliotts. They bet the farm on a lavish home and lost. Unsaid in the article was that their previous residence is also for sale and remains unsold. I seem to recall words of advice regarding all of your eggs in one basket. Let me see if I have the facts here.

    Building contractor, leveraged real estate speculator, owner of two homes in the same market ?

  • Posted By: sshameless @ 10/22/2007 1:13:12 AM

    We all know roger, you intended to flip this place within 2 years...now your stuck...I hope you have to stay in this one for 5-6 years.....at least you'll know where to find the builder when the "roof leaks".

    • Posted By: rogerally @ 10/22/2007 11:18:39 PM

      If I intended to flip within two years why would I have put a GerardUSA.com roof on it? That costs twice as much as tile. Why would I have put foam insulation in it? That also costs double. The energy payback takes seven years. The roof only pays for itselft if you live here beyond 30 years. Most buyers could care less about these things. This house was built to live in forever. We have low electric bills and can safely ride out a hurricane forever.

      Would I want to be able to sell it if I had too? Yes. And you would too. Wanting to be able to sell is not the same thing as building a glitzy Palm Beach home with a plan to flip.

    • Posted By: ucla_rules @ 10/22/2007 2:47:10 PM

      To sshameless: Come on, don't be jealous. If you know how to invest and make money, then you can be as rich as he is too. I bet you don't even have $100,000 cash in your account at all, haha. Not even $10,000.
      My suggestion: go get some education and stop spending like an idiot.

    • Posted By: lennyd123 @ 10/22/2007 1:35:31 AM

      "The good the bad, and the truth"

      Roger is not at fault for wanting to see his home appreciate in value, and that is something I believe most would agree to be a good thing to happen with what is the largest investment and purchase many people will ever make.

      Where I see an issue is (and apparantly it maybe something that was leveraged in the story for better impact, wow what a suprize lol) in the worrying and with the described main interests.

      Worrying about your current potential profit or loss in the value of your home is at best wasted energy, and with all the people currently having to worry about losing their homes etc it can seem down right obscene.

      The rise and fall of home prices seems to be newer problem or at least the larger dollar amount swings (especially on the downside) that has shown up and sort of has followed the decline in domestic manufacturing and related industries and jobs. I know something that has happened for nearly 30 years doesnt sound new to everyone, but I cant find anyone who believes when compared to the previous 100 years our RE market since the 70's could be considered stable.

      Since RE has always been a good investment (long term) and many times an unbelievably good investment short term in more recent years etc it also only makes sense that along with the increased upside potential there also is an increases downside potential. I dont have the time and maybe not even all the knowledge to fully explain all the economics of it all, but let it suffice to say that just like the stock market there will be winners in a frenzied upside swing, and losers on the down swing.

  • Posted By: week101 @ 10/21/2007 1:33:50 PM

    It's ironic that jason1976???s suggestion for bargain homes was to use zip code 15022; that zip happens to be my childhood hometown. What's missing is the fact that many of the industries have closed in that area and that there are very few good paying jobs. Location remains the dominate factor in determining housing costs.

    I currently reside in Sedona, AZ and the housing crunch has affected this area as well. The average house costs over $500k and two years ago buyers had to pay list price or better to buy a home here. Buyers are reluctant to lower prices as no-one wants to sell at a minimum gain or loss. However, I???ve seen house reduced from $70-100K on the medium price range to over $300k on higher end homes.

    These numbers are a little disconcerting and it makes you wonder how this nationwide mess got started. Of course the banks/mortgage companies should take the majority of the blame with their ???creative financing??? packages to unqualified applicants, but the media is not too far behind fanning the flames of doom and inciting panic.

    • Posted By: Texxxxxxxxxx @ 10/22/2007 12:06:25 PM

      I wish people would STOP trying to blame the fact that they OVERPAID for their home on Banks and Mortgage cos. I guarantee that EVERY single buyer when walking into one of these places, has been told that they SHOULD get a FIXED RATE mortgage. And the majority of them said , , well, then I can't afford this house! And then, AND ONLY THEN, is when the loan officers offer them other financial packages. Supposedly so that they buyer can "AFFORD" the home. Problem is THEY CAN'T AFFORD THE HOME. but please let's not act like these poor louts (that think their prospective home will be worth 100k more in six months after their "FLIP" ) are going in with their eyes wide SHUT. They know that they can't afford the home they are trying to buy, and are willing to get it ANY WAY THEY CAN. So how about a 3/1 ARM, 5/1 interest only, thats the way you can get into this house. IT'S SICKENING. So the moral of the story is these folks GAMBLED THEIR FUTURE and got caught with their hand in the cookie jar. 70% of the loans in our area (so.cal) were written on adjustable rate mortgages in the last 5 years. And now those loans are adjusting up. We have houses all over our neighborhood that are being foreclosed upon, literally HUNDREDS OF THEM. And HERE'S THE KICKER OF THEM ALL, these same folks who paid ZIP to get into the houses are blaming the same banks and Mort. cos and saying that they were MISLED INTO LOANS. WHAT a FREAKIN JOKE! They only tell you 40 - 50 times on loan documents what your expectations are and how the monthly price WILL GO UP. or should we feel sorry and bail out these folks that were smart enough to buy a $700k dollar home, but can't add. IT'S SIMPLY LAUGHABLE. P.S. - these are also the same folks that are not paying their property taxes, GUESS THE GOVERNMENT FOOLED THEM TOO!

  • Posted By: lennyd123 @ 10/22/2007 1:32:20 AM

    "The good the bad, and the truth"

    Roger is not at fault for wanting to see his home appreciate in value, and that is something I believe most would agree to be a good thing to happen with what is the largest investment and purchase many people will ever make.

    Where I see an issue is (and apparantly it maybe something that was leveraged in the story for better impact, wow what a suprize lol) in the worrying and with the described main interests.

    Worrying about your current potential profit or loss in the value of your home is at best wasted energy, and with all the people currently having to worry about losing their homes etc it can seem down right obscene.

    The rise and fall of home prices seems to be newer problem or at least the larger dollar amount swings (especially on the downside) that has shown up and sort of has followed the decline in domestic manufacturing and related industries and jobs. I know something that has happened for nearly 30 years doesnt sound new to everyone, but I cant find anyone who believes when compared to the previous 100 years our RE market since the 70's could be considered stable.

    Since RE has always been a good investment (long term) and many times an unbelievably good investment short term in more recent years etc it also only makes sense that along with the increased upside potential there also is an increases downside potential. I dont have the time and maybe not even all the knowledge to fully explain all the economics of it all, but let it suffice to say that just like the stock market there will be winners in a frenzied upside swing, and losers on the down swing.

    Now those like Roger should honestly not bother with the day to day short term changes, and count their blessings that they are in a financial situation that allows them to weather the storm of the downturn. On the positive side for them there are and will be countless purchasing opportunities that will offer even greater return on investment (long term, not short) then their original decisions.

    Remember all those in the early and mid 90's both professional builders, investors, and individual homeowner etc who got into serious trouble from speculation and greed etc? I guess we all forgot about those declines from the excitement of the recent boom, but just like the history of the previous decline showed us there will eventually be an upside again.

    Now for Roger I have to say I can feel your pain, but I cant share your concern or anexiety. I know you believe this story may cause you to apear greedy, but I have to disagree as it really makes you appear to be out of touch with the real problems many are facing, and sort of like snobish for appearing to be so overly concerned with profit during such times etc. I know there was some idea from those writing the story to make it seem a certain way (its sort of obvious so dont let it bother you much) and this seems to be the way some feel they have to be in order to make things "news worthy"

    I woul

    • Posted By: CokiCat @ 10/22/2007 9:20:35 AM

      Re: "...winners in a frenzied upside swing, and losers on the down swing" Turn that statement on its head and think "losers in an upside swing (ie, paying too much) and winners in the downswing (scooping up bargains)" -- that's buying low and selling high. And as simple as it sounds, that's the way we should invest our money. Practice this: When you read articles that tilt in one way, you tilt the other way. When the buzz in critical mass is for one sector, look at the underappreciated sectors, put them on your watch list, and take the time to study what makes certain companies strong. When an entire sector is getting pummeled in the press, a sector that has potential to rebound, pluck out the few companies that might be unfairly dragged down and (quickly in this case) determine whether buying the depressed stock might be a true bargain. Basically, think critically like a short seller, without actually being one and assuming the risk. That's how you win on an upswing and a downswing.

  • Posted By: dnajsul @ 10/22/2007 4:17:10 AM

    It is discussed in some schools of thought that considering the home you live in as an investment is a mistake. Generally, it should be seen as a liability that needs to be managed. Viewing the home burdened with a 30-year mortgage as something that will provide future (high) returns does not make much economic sense, because your are the one utilizing the benefits of this investment, and plus you are paying interest on that for 30 years. Many families fall into the trap of building bigger and bigger homes by selling their old homes, without ever going out of mortgage. Roger would have been much better off if he would have bought an investment home (or other property) for renting with the inheritence he had, and that with a shorter mortgage, which could have been converted into a dream home after the investment pays off the mortgage and starts bringing additional income. It is the old story - we want everything and now - instant gratification with funds we don't own yet. On the other hand, now that the investment has been made, it does not make sense to dwell on the foregone short term returns, but focus on the long run. Roger's home being a high quality structure will allways retain value and the right buyer will allways come along for something that is of undisputable, hight above average quality, should the need exist to divest from it. If Roger would have built an average home, on the other hand, he would definitively have problems selling it if the need would arise. And since it really does look like a dream home, the Elliotts should be grateful for it and enjoy every moment of living there, without being borhered with second thoughts.

  • Posted By: JonathanPRuiz @ 10/22/2007 2:46:55 AM

    It is unfortunate that the real estate market has taken such a turn. Hard working Americans have invested in building their home, buying a home, refinancing their home, etc. and we all were not ready for this down fall. But we should have seen it coming with all these lenders approving loans to families which in reality did not have the credit, income, and the knownledge of the lender they were dealing with. Of coarse, everyones dream is to some day buy a home and some lenders just took advantage of that fact. But its good to see that these lenders have gone out of business for bad business. Now its time to clean up and get back to the traditional home selling with sound finanical lenders and qualified sales agents.
    JPR - Laredo, Texas

  • Posted By: lennyd123 @ 10/22/2007 1:39:31 AM

    "Comment: We all know roger, you intended to flip this place within 2 years...now your stuck"

    Funny cause many "flippers" stuck their totally out.

    Well maybe funny isnt right choice of words, but still there are many now being offered by the banks for less than many "flippers" paid for the property itself, and not including any improvements.

    Its a mess, but it seems these highs and lows in our bi polar RE market really help to push our economy and allow politicians to show us just how great they want us to believe things are, and also just how bad they want us to believe they are, and just pretty much manipulate things in general.

  • Posted By: lennyd123 @ 10/22/2007 1:35:52 AM

    Now those like Roger should honestly not bother with the day to day short term changes, and count their blessings that they are in a financial situation that allows them to weather the storm of the downturn. On the positive side for them there are and will be countless purchasing opportunities that will offer even greater return on investment (long term, not short) then their original decisions.

    Remember all those in the early and mid 90's both professional builders, investors, and individual homeowner etc who got into serious trouble from speculation and greed etc? I guess we all forgot about those declines from the excitement of the recent boom, but just like the history of the previous decline showed us there will eventually be an upside again.

    Now for Roger I have to say I can feel your pain, but I cant share your concern or anexiety. I know you believe this story may cause you to apear greedy, but I have to disagree as it really makes you appear to be out of touch with the real problems many are facing, and sort of like snobish for appearing to be so overly concerned with profit during such times etc. I know there was some idea from those writing the story to make it seem a certain way (its sort of obvious so dont let it bother you much) and this seems to be the way some feel they have to be in order to make things "news worthy"

    I would recomend you count your blessings like the rest of us who are still enjoying positive equity (did I mention my own primary residence is down over $200k ) and look closely at your options before making any changes. I have seen so many different opinions from so called professionals that I have trouble remembering or deciding if this is a market to buy up, downsize, or sell everything and move to Mexico :)

    Lastly I have to admit I do feel somewhat for those who decided to buy or build around the height of the market, and though its not a feeling of sympathy I can certainly understand the many reasons it would cause concern etc, but I also have to admit I am somewhat confused by some that have also purchased other high end items (boats, cars etc etc and some topping the amounts of many homes) that are doomed to normal depreciation that will hardly ever recover period, but fully accept this without worry of any kind.

    So I guess short of selling now (with a much lower than anticipated profit) and redirecting your equity into leveraging several investment properties as to create an even larger long term profit etc you will just be stuck in that very nice looking and sounding home for a little longer than expected, and I cant feel sorry for that either :)

  • Posted By: sshameless @ 10/22/2007 1:01:33 AM

    Come on Roger....we all know your intention was to flip this house within 2 years...now your stuck. I hope your in this one for 5-6 years....at least you'll be able to find the builder when the problems start showing up.
    Enjoy your home and have some nice cheese with your wineing.

  • Posted By: Raindrops @ 10/22/2007 12:53:41 AM

    NEW YEAR is just around the corner---ask any common sane person---what is his or her wish?
    PEACE is all we want---PEACE is all that God asks---why dont we get this into our swollen heads?Why dont the world rulers understand it?
    POVERTY must go----ILITRACY too.

  • Posted By: sshameless @ 10/22/2007 12:53:05 AM

    Enter Your Comment

  • Posted By: sshameless @ 10/22/2007 12:52:55 AM

    Enter Your Comment

  • Posted By: Takecare @ 10/22/2007 12:51:50 AM

    I have heard it said - when is the right time to buy? Anytime. That is anytime you can afford it. How much should you pay? As much as you can afford. You did just that. Affording it also means to consider the cost of property taxes, insurance, interest payments and maintenance like we all have to do. So the real problem is the potential ROI and the sense of wellbeing that brings if it is positive. I believe we are all swimming in a sea of mass greed and fear in the real estate world. That seems to be what drives the market. We are in a period of fear at the moment and that will probably change. We are human and seem to love both parts of fear and greed or you could say contraction and expansion. As a spiritual person you have a wonderful opportunity to say, thank you God for the ups and thank you God for the downs. You are not your house or the value associated with it. I say, let go of the notion of potential loss and cherish the time you have with your wife and family and good fortune to enjoy this house.

  • Posted By: Takecare @ 10/22/2007 12:50:59 AM

    I have heard it said - when is the right time to buy? Anytime. That is anytime you can afford it. How much should you pay? As much as you can afford. You did just that. Affording it also means to consider the cost of property taxes, insurance, interest payments and maintenance like we all have to do. So the real problem is the potential ROI and the sense of wellbeing that brings if it is positive. I believe we are all swimming in a sea of mass greed and fear in the real estate world. That seems to be what drives the market. We are in a period of fear at the moment and that will probably change. We are human and seem to love both parts of fear and greed or you could say contraction and expansion. As a spiritual person you have a wonderful opportunity to say, thank you God for the ups and thank you God for the downs. You are not your house or the value associated with it. I say, let go of the notion of potential loss and cherish the time you have with your wife and family and good fortune to enjoy this house.

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