My Old Condo Has Been Given Up

Our family was driving through a parking lot after leaving the grocery store when my wife randomly spotted my old neighbor entering a drugstore in the same plaza.  She works somewhat close to where we live, so this made sense.  We stopped the car and went in, as she’s a great lady and we hadn’t seen her in quite some time.

She caught me up on the fact that the person that bought my condo has given it up and turned it back to the bank.

This didn’t surprise me but it still left me sad.  I loved the condo, it was the first place I owned, but the signs were there that her purchase might not work out:

  • She financed the entire purchase – She purchased at the tail end of the ‘easy credit’ phase and was able to finance the full purchase.
  • She used Countrywide as her mortgage company – They ended up being the epitome of bad loans with awful rates.  Again, she was probably one of the last people to get a loan from that company before the bottom fell out.
  • She ended up moving out a few months later – She was a single lady, but I heard that she reconciled with an ex and moved out of the state, leaving the condo as a rental to try to stay afloat
  • The condo market just sucks – Condo sales around the metro Detroit area have been harder hit than any other element of residential real estate.  Quite honestly, I bet the purchase price on most condos in that complex would be less than that of what I originally paid in 1999.

It pains me to see that happen to a place that will always hold great memories for me.  I lived there for eight years, I proposed to my wife in the living room, I learned how to paint, and went through a lot.  I always hate seeing someone walk away from their mortgage as well, and I’m not at all advocating what the owner has done, but at the same time, it doesn’t surprise me in the least.

The positive is that, according to my old neighbor, the owner didn’t go the route that so many people do before they leave a house, where they trash it and rip out anything of value.  That actually happened to a unit behind me shortly before I moved out, and it’s no fun to see.  In any case, once it gets sorted out with the bank, hopefully it will sell quick and make someone happy.  It’s an end unit, it sounds like it’s been kept up and would be in good selling condition assuming nothing happens to it in the mean time.  And, I can certainly vouch that it’s a great place where a lot of great memories are possible!

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7 thoughts on “My Old Condo Has Been Given Up

  1. This woman had no hope of recouping her investment. Using Japan as a model, the U.S. will have long term deflation. What does this mean for housing? Very bad things. Here are the facts. Before Japan's housing deflation cycle began, housing prices doubled in 10 years. In the U.S. (before houses started going down in value 2 years ago) they doubled in 10 years. Japan is in the midst of a 17 YEAR deflationary housing market. The U.S. is in the midst of a 2 YEAR deflationary housing market. Does this mean the U.S. has 15 years to go in terms of housing prices going down? VERY POSSIBLY. The problem with deflation is that everybody says, "well, why buy now when it is going to be cheaper next year?" This mindset, along with the fact that interest rates will be going up in the next 2-5 years means VERY BAD things for housing. When interest rates go up, homes will be less affordable as mortgages will cost more. This will put more downward pressure on housing. This will reinforce the mindset of, "why should I buy now if it will be cheaper next year?" I would not recommend buying a home until interest rates max out, which could take 5 years? Then, you'll need to be able to understand if you buy the home, will 10 others around you go into foreclosure. I just don't see a good entry point for buying a home in the foreseeable future.

  2. As a point of clarification, I'm not against buying a house. I'm just interested in helping people understand that if they think they might NEED to sell their house in the next 15 years, then they should be preparded to accept a potential significant loss. If someone wants to live in the house for 20+ years and is stable in terms of cash flow, or doesn't even need a mortgage (i.e. pays cash), then they're in a different league and don't need to worry about the things that someone who might need to sell over the next 15 years does.

  3. Yeah, it made me sad, too, when the woman who bought my house–the first house I ever bought on my own, and one that I really loved–finally defaulted.

    Not before she let it go to pot, though.

    She bought for about $211,000, financing every penny. Incredibly, the bank lent her this amount even though SHE HAD NO JOB. Nor, it developed, did she have any intention of ever getting a job. Then as housing values here ballooned, she borrowed against equity, ultimately running up the debt to something well over $300,000.

    She spent most of her time either in Central America or northern California, where she had become involved with an oddball communal group. While she was gone, she would leave the house empty or allow a friend's niece to camp out there. Naturally, all the landscaping died or went to seed–this was a house that had nine mature trees, three of them bearing fruit trees…now all dead, except for the two citrus.

    Then she rented to people who trashed it.

    After the bank repossessed the place, my Realtor got me in for a peek. In addition to killing the landscaping and inflicting general wear and tear on the interior, the morons had broken apart half the drop-down-dead GORGEOUS custom-tiled countertops I'd installed.

    The place was sold at a ridiculous discount to people who can't afford to keep it up. Since I still live in the neighborhood that's being affected by this blight, every now and again, I'll call the city when the weeds reach waist-high.

    It's not just the downward pressure of the cheap foreclosure prices that pushes real estate values down. When lower-income folks buy these places, they don't understand how much it costs to maintain a 40-year-old house. Many lack the cultural background that teaches the value of maintaining a home. Some have never had to pay for the water to maintain a lawn or for the air-conditioning to cool 2,000 square feet in 110-degree heat, and so their budgets are stretched to the max by routine costs. Consequently, houses that are already stressed by having been occupied by bankrupts continue to go downhill.

    Anonymous's remarks on the dismal future of real estate are scary. I doubt if many Americans appreciate how long this depression is likely to persist and how disastrous it may be, over the long term, for an entire generation of citizens now in their 20s and 30s.

  4. @Anonymous, I understand what you're saying. Still, I don't know that we as Americans are patient enough to wait on the sidelines for years and years. I think there's a natural need and desire to own a home that, even with the stink of this housing market, will keep people in. Either way it will be interesting.

    @Funny, that's a sad situation and even sadder that you saw it up close. I think there are certain times when it's probably better to just remain in the dark.

    @Grouch, the thought has crossed my mind but getting into the landlord business is not really where I'm thinking I want to be right now. It's hard enough keeping up on everything with the house we live in!

  5. Very interesting times, Money Beagle. You're probably correct in general. Here's my point though – I know I said interest rates won't go up for several years. HOWEVER, there is a possibility that Bernanke will raise them maybe as much as 2% between Nov and Dec of 2010 (right after the Congressional elections and before a new Congress starts fresh in Jan 2011). Why? Because Bernanke needs ammo. He has no ammunition left to prevent the next "Great Depression." He did his disertation on the Great Depression and always mentions stories about the Great Depression in his Congressional testimony. Currently, he knows he can't do anything else to stop a great depression because rates are already at 0% and he can't add any more to his balance sheet of $2,000,000,000,000+. I think this deeply disturbs him, that he can't do anything. Raising rates in Nov and Dec 2010 would sure be a shock to everything, especially mortgage rates and housing (it would cause more foreclosures and price declines). But, then at least he'd have 2% to use throughout 2011 and 2012 to prevent the next Great Depression. By the way, if rates go up at the end of 2010, then be prepared to get out of bond funds you hold because that bubble would burst and you would probably lose 25%. Really crazy times we live in where "safe" bond funds are so at risk.

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