Dream House or Nightmare?

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  • Posted By: Positivethinker @ 10/21/2007 11:02:53 AM

    An interesting thing to me is how the news stories sight how inevitable the fall in real estate was. How obvious it should have been to anyone, but if you look back through news articles and stories between 2000 and 2005 there is no mention of this, for sure to happen scenario. (I don???t guess those writing now were around then) the fact of the matter is, I made the comment to friends and acquaintances that this very thing was on its way, and that they should be very careful in purchasing and building. I was put down and told how dumb those comments were. I was given the arguments: They are not making anymore land, and that more people meant, need for more housing. The only direction for real estate was up. These comments were from the supposedly educated. Apparently they learned nothing during their education. (One was a history major).
    All manias end the same way. There are a number of them operating now in other areas, of coarse those warning voices are still the dumb ones, and now no one wants to discuss the accuracy of the housing debacle comments. Waite until the other shoes fall.
    After the fact news reporting is of little value.

    • Posted By: CokiCat @ 10/21/2007 11:48:09 AM

      You hit all the right nails on the head. I recall the same push-back. Journalists don't always provide insight. I think what we're witnessing here is a large fracture in the market that has finally allowed saner points of view to flood the marketplace. I venture to say that every person who've posted an irritated response here has held these views for years and are just getting to air them. Prior to this, they likely felt that they were just speaking to a brick wall. But all the viewpoints here are based on sound investing principles that can be extrapolated to every sector. And buying low, selling high never looked sweeter than when a market bottoms out. Most of us are wondering when the low point is, because no one wants to buy into these homes too soon (not that I could ever personally purchase a home even half this featured homes' price). The town I live in has homes at an median price of $500,000 (recall that a jumbo loan, for luxury homes, start at $417,000, so $500K is nuts for an average). Also, the county I live in has the highest property taxes in the region. Even if the home values halve, there's no way I can enter this market, so moving's my only option. However, for others, now's a good time to watch the market -- they have, I say, 6 to 12 months on their side (looking at how long it takes for inventory to move) to watch and wait for the best deals. At the intersection near where I live, just spotted a sign of desperation: "Bank must sell. 6bd/3bath for $379,000." I'm not sure what condition this home was in -- perhaps fire damaged? -- but in my neck of the woods (Northern Virginia), it's worth a look. Still too steep for me, but I hardly need that much space.

  • Posted By: kod111 @ 10/21/2007 11:46:48 AM

    It will come back......It always has

  • Posted By: MusicB @ 10/19/2007 9:38:57 AM

    Please folks, stop bashing the Elliots. They are an EXAMPLE of what has been happening across the nation, not a target board. Yup... they might have put too much flash into the house, but most folks do the same on smaller things all the time (who amongst us has paid $5 for a bag or popcorn at a game or movie?). Although poorly written, the general gist of many posts isn't too far from the truth, i.e., that the Elliots shouldn't have gone into this as an "investment". If the house loses value from here for a while, then that's a reasonable expection. The "flip this house" period is ending, and this is just a more extreme version of the same story playing out across the country. Whether or not anyone should be living in McMansions is another issue altogether, and one that will be borne out by simple economics, personal desires and happiness, etc over time. My personal opinion is that a 3500 ft2 house is not "too big" for a family of five (today), but it would be a bit more than I'd want for two or three. If energy prices get out of hand, then we'll all be scaling back. In this case, however, size isn't the reason for the price tag, since a 3500 ft2 house can be built for much less. It's those extras and the land itself, which was a significant theme in the story. The Elliots wish that they hadn't used so many extras, which is a perfectly reasonable (retrospective) conclusion to me. I don't understand why folks are so angry about them sharing their story, afterall, I'm certain that the contractors, suppliers and all the "down stream" employees in the process benefited. Would it have been better if they (and everyone else across the country) had dug a hole on the lot and buried the money, or invested it into stocks? If you want to get angry, look to the contractors that have been charging double to triple historical fee rates for their contribution to the construction mania.

    • Posted By: CokiCat @ 10/21/2007 11:30:53 AM

      Your post reminded me about some recent reading ... the small home movement is coming! :)
      http://resourcesforlife.com/groups/smallhousesociety/

      I've nearly picked out my favorite designs ... note that the smaller the house the dearer the details :)
      http://rosschapin.com/

  • Posted By: nexplorer @ 10/21/2007 7:52:51 AM

    Although I feel bad for this couple's situation, they did make some major mistakes. I've been a Realtor since 1970 so I have a little bit of experience. You can't have it booth ways. If you custom design a house with all kinds of expensive extras you are not likely to get the kind of return that they are expecting. You customize your house for yourself. Too many times people will draw up their own design and load up with custom extras expecting the buying public to love it. That usually doesn't work. If you are going to build for resale, go with more traditional proven plans and amenities and your house will sell. Put your efforts into top notch quality finish work to make it stand out from the rest. A $40,000 epoxy metal lifetime roof to most buyers is just a roof. Better off to go with good quality traditional roof and save $25,000. I am sure their Dream Home is beautiful to them, but to most buyers, even in a good market, it's just another house on the market. The neighbors love it, but would they buy it? If I were them I would just enjoy the wonderful home that they have built together. There was a time when home was just home. We didn't make investments out of them. The market will be back soon enough.

  • Posted By: nexplorer @ 10/21/2007 7:52:22 AM

    Although I feel bad for this couple's situation, they did make some major mistakes. I've been a Realtor since 1970 so I have a little bit of experience. You can't have it booth ways. If you custom design a house with all kinds of expensive extras you are not likely to get the kind of return that they are expecting. You customize your house for yourself. Too many times people will draw up their own design and load up with custom extras expecting the buying public to love it. That usually doesn't work. If you are going to build for resale, go with more traditional proven plans and amenities and your house will sell. Put your efforts into top notch quality finish work to make it stand out from the rest. A $40,000 epoxy metal lifetime roof to most buyers is just a roof. Better off to go with good quality traditional roof and save $25,000. I am sure their Dream Home is beautiful to them, but to most buyers, even in a good market, it's just another house on the market. The neighbors love it, but would they buy it? If I were them I would just enjoy the wonderful home that they have built together. There was a time when home was just home. We didn't make investments out of them. The market will be back soon enough.

  • Posted By: CokiCat @ 10/21/2007 11:19:22 AM

    The market will stabilize, and many families will breathe a sigh of relief. But that doesn't mean that THIS family will see anything near the appreciation they are hoping to get. Most of this investment appears to be emotional -- to build a "dream" house, well, that engages a lot of subjective emotions. Also, this family is acclimating itself to a certain lifestyle of living, so when they decide to downshift and "cash in" on the appreciation (again, debateable), they will have to make a major lifestyle shift from dream life to next phase of life to realize the profits they're hanging their hopes on. Quite a different investment than taking a fixer upper in a yet-undiscovered neighborhood and weighing each improvement based on whether it will give you a good return on investment for the money. That's investing. It's all about margin. Someone, somewhere told the average American that real estate investing is an easy game -- but it appears by the headlines that there are a lot of amateurs doing this. I feel sorry that this family didn't seek/or perhaps listen to more solid advice. Very foolish. Let's learn from this. One other point, whenever people chatter on about their homes being a nest egg -- of course, not taking into account how many times they've lost equity by cracking it open like a piggy bank -- and how they expect to retire on the sale of their home, I'm always tempted to ask them where they intend to live next ... a cardboard box? You have to buy another home, right? Or rent, right? And that will spend a large part of those so-called savings. It's a scary picture. And it just points out how financially illiterate Americans are. Hard lessons.

  • Posted By: CokiCat @ 10/21/2007 11:17:36 AM

    The market will stabilize, and many families will breathe a sigh of relief. But that doesn't mean that THIS family will see anything near the appreciation they are hoping to get. Most of this investment appears to be emotional -- to build a "dream" house, well, that engages a lot of subjective emotions. Also, this family is acclimating itself to a certain lifestyle of living, so when they decide to downshift and "cash in" on the appreciation (again, debateable), they will have to make a major lifestyle shift from dream life to next phase of life to realize the profits they're hanging their hopes on. Quite a different investment than taking a fixer upper in a yet-undiscovered neighborhood and weighing each improvement based on whether it will give you a good return on investment for the money. That's investing. It's all about margin. Someone, somewhere told the average American that real estate investing is an easy game -- but it appears by the headlines that there are a lot of amateurs doing this. I feel sorry that this family didn't seek/or perhaps listen to more solid advice. Very foolish. Let's learn from this. One other point, whenever people chatter on about their homes being a nest egg -- of course, not taking into account how many times they've lost equity by cracking it open like a piggy bank -- and how they expect to retire on the sale of their home, I'm always tempted to ask them where they intend to live next ... a cardboard box? You have to buy another home, right? Or rent, right? And that will spend a large part of those so-called savings. It's a scary picture. And it just points out how financially illiterate Americans are. Hard lessons.

  • Posted By: supersuperwendy @ 10/21/2007 11:11:41 AM

    oh boo hoo. let me break out my little violin. gimme a break.

  • Posted By: supersuperwendy @ 10/21/2007 11:10:18 AM

    oh boo hoo...at least he owns a home.

  • Posted By: Positivethinker @ 10/21/2007 10:59:47 AM

    An interesting thing to me is how the news stories sight how inevitable the fall in real estate was. How obvious it should have been to anyone, but if you look back through news articles and stories between 2000 and 2005 there is no mention of this, for sure to happen scenario. (I don???t guess those writing now were around then) the fact of the matter is, I made the comment to friends and acquaintances that this very thing was on its way, and that they should be very careful in purchasing and building. I was put down and told how dumb those comments were. I was given the arguments: They are not making anymore land, and that more people meant, need for more housing. The only direction for real estate was up. These comments were from the supposedly educated. Apparently they learned nothing during their education. (One was a history major).
    All manias end the same way. There are a number of them operating now in other areas, of coarse those warning voices are still the dumb ones, and now no one wants to discuss the accuracy of the housing debacle comments. Waite until the other shoes fall.
    After the fact news reporting is of little value.

  • Posted By: FLforREAL @ 10/21/2007 10:47:52 AM

    If everyone would stop treating their homes like a money machine and remember that a home is just that...A HOME!! Investors and REALTORs are not to blame for the real estate market. Things got hot and investors saw an oppotunity, and REALTORs rode the wave. Now we're drowing. Home buyers with ARMs are now drowining and banks have more properties than they care to have. It' s a vicious cycle....it's the nature of economics. Nobody is at fault!!!

  • Posted By: FLforREAL @ 10/21/2007 10:40:18 AM

    If everyone would stop treating thier homes like investment properties and rememeber that a home is just that a HOME!!

  • Posted By: kevinb @ 10/21/2007 10:34:19 AM

    When the median income can't suppor the average mortgage... what did you expect would happen. After all the the real estate boom was a scam set up by investors and realtors anyway.

  • Posted By: nolesusedtobegood @ 10/21/2007 10:32:27 AM

    ah, finally the greedy bug bit someone on the ass

  • Posted By: kevinb @ 10/21/2007 10:32:25 AM

    Well it was bound to happen when the average income can't support the average mortgage. Realtors and investors just got greedy.

  • Posted By: OPENWIDE @ 10/21/2007 10:26:33 AM

    oh well, stop trying to KEEP UP WITH THE JONSES. SHUT UP and STAY there or SHUT UP and sell it.....EITHER WAY..............SHUT UP and stop B*TCHIN.

    You shoulda bought what you NEEDED. BOO HOO

  • Posted By: OPENWIDE @ 10/21/2007 10:25:41 AM

    oh well, stop trying to KEEP UP WITH THE JONSES. Shut up and STAY there or SHUT UP and sell it.....EITHER WAY..............SHUT UP and stop B*TCHIN.

    You shoulda bought what you NEEDED..

  • Posted By: buybizwiz @ 10/21/2007 9:56:20 AM

    I would like to take this opportunity to recognize Mr. Daniel McGinn for his exceptional journalistic skills to uncover this rare and heartbreaking story. Way To Go Sherlock.

  • Posted By: vandyke50 @ 10/21/2007 9:55:34 AM

    Hello, As a property developer I feel that we are only starting the downward trend in the property market.
    My learned colleague from Michigan seems to have been somewhere else if his housing market has been falling for 10 years in his neck of the woods.
    Over the last 10 years the prices have risen so quickly and so high that is was inventible that the market would fall once people woke up and realized the Emperor was indeed naked.

  • Posted By: vandyke50 @ 10/21/2007 9:55:27 AM

    Hello, As a property developer I feel that we are only starting the downward trend in the property market.
    My learned colleague from Michigan seems to have been somewhere else if his housing market has been falling for 10 years in his neck of the woods.
    Over the last 10 years the prices have risen so quickly and so high that is was inventible that the market would fall once people woke up and realized the Emperor was indeed naked.

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