…seen from the other side
At any party or social gathering in Glendale, the topic of conversation invariably gets around to real estate. Nothing unique to Glendale — mortgage rates and the price of homes have been a national obsession for years. But it has been particularly manic here in Southern California, home to one of the biggest real estate bubbles of all time.
I’ve been in dozens of those conversations. “Did you hear what the Jones’s house sold for?” “Have you refinanced?” “I’m thinking of getting a broker’s license.”
In the last three years, of course, the tone of the conversations has changed. Now it’s “There’s another foreclosure on our block.” “We’re under water, but hanging in there.” “Do you think the market’s turning around?”
Back in the heady days of 2006, my wife and I were homeowners in Glendale’s Verdugo-Woodlands neighborhood. Like everyone else in our situation, we watched our home value soar and our home equity cushion grow. That was going to help fund our retirement and our kids’ college education.
We had bought our little two-bedroom bungalow in 1998 for $289,000, and eventually put another $100,000 into it, including an addition with a third bedroom. Even with a big home equity loan on top of a mortgage, by 2006 we were way ahead of the game, so far above water we couldn’t see the waves. We and our neighbors toasted our good fortune.
But not all of our friends were hoisting glasses. Some were renters, and for them it was an entirely different conversation. Their dream of home ownership was slipping out of reach. Those conversations could get a little uncomfortable, as our dream of fat home equity cushions became their nightmare of unaffordable housing. And their hope of a real estate crash bringing prices back within their reach was our nightmare.
Reading real estate blogs in 2006 (didn’t everyone?) was a sobering experience: Homeowners cheered the bubble and rooted for more price gains, denying the possibility of a crash. Renters, angry at being priced out of the party, excoriated the greed of home sellers. They predicted an armageddon that would punish the avaricious and reward those who waited on the sidelines. It was out-and-out class warfare: land owners vs. serfs.
That same year, I accepted a transfer from my employer and we moved to Washington, D.C. We sold our house in V-W at the top of the market, and packed what seemed like suitcases full of cash (figuratively) for our move back East.
Put simply, we were drunk on home equity. We bought a 3,200-square-foot house in suburban Vienna, Virginia. We knew we were paying too much and that prices were not likely to keep moving up. But we could afford it, we told ourselves, and felt we deserved it after living in small houses for 18 years. Plus, we were planning to live there for many years, not trying to flip it.
Then came the crash of 2008. I lost my job, and we ended up back in Glendale. We couldn’t sell our house in Virginia, but we managed to keep up the huge mortgage and tax payments and avoid foreclosure by renting it out.
We put it on the market for sale three times over a two-year period as its value eroded, before we finally sold it in 2010. We were luckier than many — we weren’t under water, but we lost almost half of that big home equity pile we had accumulated over two decades of home ownership.
Today we are renting a little Spanish bungalow in Verdugo-Woodlands, about six blocks from the home we once owned — which, to add insult to injury, has been painted a hideous lime green by the new owners.
These days, I see those Glendale real estate conversations in a different light. I sympathize with our neighbors who are struggling to hold onto their homes, or have seen their nest eggs evaporate. They talk hopefully of a market rebound, a day when prices resume their upward climb and make them whole again.
That’s when the conversation becomes a little uncomfortable — for me. I know that our only hope of getting back into home ownership is for prices to keep falling, maybe another 10 or even 20 percent. We still have a decent sum in the bank, but not enough for a prudent down payment and a manageable mortgage at current prices.
In truth, given our age (mid-50s) and with two kids to put through college, I’m not sure it will ever make sense for us to be homeowners again. Those are the cold, hard financial facts, but emotionally it’s hard to give up on the dream of owning your own little patch of the Earth, especially when you had one for 20 years.
Economists talk about a possible double-dip recession in 2012, and another wave of foreclosures waiting to flood the market. What a miserable prospect — and what a hopeful sign for us. It gives me no pleasure to think that, but there it is.
Among friends, I keep my thoughts to myself. I don’t rant on blogs about greedy home sellers, having been one myself. I sit silently on the sidelines, a renter in the neighborhood where I was once an owner, waiting and watching from the other side of the property class divide.
That’s my Glendale real estate story. What’s yours?