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Shall I Walk Away From My Home? Part 2

This post was written by jd on April 21, 2009
Posted Under: Real Estate

walking  

The post I wrote entitled “Shall I Walk Away from my House” drew some real good comments both pro and con.

Shall I walk away from my home? If you are backed against a wall and have no choice, then of course the answer is yes, if you have no other choice. But If you like your house, you can make the payments, then the answer is no. You should have bought your home because you liked it, it appealed to you; it made you happy to have it as your house. The consequences of walking away are that you are going to have to rent because your credit score is down the tubes. Because of your low credit rating you are going to have to rent from three to five years or more because lenders won’t lend money for you to buy a home.

Owning a home is forced savings. You have to make the payments, your principal is going down, and money is depreciating, making your payments lower in relation to your earnings over a period of time.

The primary purpose of owning a home, unless you are an investor, is to live in the house, not to make a profit off of it. I believe that some people got carried away during the housing boom times and bought a home just to make money, not live in it. So if you have a steady job, and feel secure in it, this is just as good a time to stay in your home as any other. The question that goes along with this is: should you buy a home now, if you don’t have one.

The philosophy that I’ve had all my life in regards to a home has been to buy not to rent. I remember when I worked as an engineering aide and making barely enough money to do anything, I bought my first house through a private party with a small down payment. The seller carried the paper.  From that first purchase, a few years later, I was able to trade the home in Diamond Springs for a lot in Nevada City. Since I had the lot free and clear, I was then able to get a loan to have a contractor build a new home for me. My mortgage payment was $175 a month. I was in charge of the Nevada County Engineering Department at that time, and believe me, that mortgage payment was all I could afford. Do you think money has depreciated?

Is this a good time to buy? Is this a good time to hold on to your house if you can? The answer to both of these questions is yes. It’s always a good time as far as I’m concerned. I would rather buy a home than rent. I don’t like to be under a landlord.  Besides, it always seemed a waste of money to pay off someone else’s property when you could be paying off your own.  Time has shown that money depreciates and real estate increases in value.  My first mortgage on the house I had built was $175 a month. I could barely afford it. What can you buy today for $175 a month? Not much, certainly not a home.

Some people have forgotten the value of home ownership during this downturn. All you hear about are the people who are losing their homes. We forget that most of us bought a home to live in, not to make a living buying and selling, or getting into a “get rich” scheme.

So should you stay in your home?  My answer is stay there if you can, or buy one if you can.  History, no matter what people say, shows that real estate goes up and the value of your money goes down. I wish I had that $175 a month mortgage on my present home.  Let me know what you think.

Reader Comments

Yea, the person who walked away from their home or whatever made an interesting read. I always thought it was creepy that everyone assumed real estate would just keep going up forever. Basically a similar thing is happening on a micro scale to oil right now, everyone expects the price to go up with economic recovery. While I believe equities will continue to recover from the credit crisis, I think oil will basically wait until total unemployment levels off, say in 9 months. (I am not betting for or against oil right now, but I may in a month or two.)

#1 
Written By David Pinegar on May 2nd, 2009 @ 1:29 PM

Anyway, for the same reasons, my random guess is that the real estate market will gain stability, and thus price recovery, around the same time. it may be even 18 months from now.

I read in a book a few months ago that one reason the upper class in Britain did so well at preserving their wealth for hundreds of years is that they always had a lot in real estate. When crisis broke out, there would be no liquidity; since they could not sell for any price when they needed the money, they would still have it when the war ended or whatever. It really is a great thing about real estate, and a tiny bit still true today. If half the sales are forclosures, is that even a market?

#2 
Written By David Pinegar on May 2nd, 2009 @ 1:36 PM