This sounds horrible, but is it really?
"The consequences to American homeowners' balance sheets could be immense. Buyers who put 20 percent down on a home purchase that falls 10 percent in value would see half their equity wiped out, according Michael Sklarz, chief valuation officer for FNIS, a Santa Barbara, Calif.-based real estate consulting firm."
This actually happened to me. You be the judge.
May, 1989, signed a purchase agreement for $289,950. for a 3X2 Calif fixer upper in a middle class neighborhood in Santa Clara, CA. This sale defined the peak of the local housing market for the next 5 years at least.<g> I put down something north of $100K, mortgaged the rest. Two years later, in the 1991 doldrums the housing market had cratered and my home's value had declined to about $210K. Sorta wiped out most of my equity, right?
So what did I do? I discussed matter with country tax Assessor's office and got a permanent reduction in annual property taxes based on a lowered assessed valuation. In other words, I went out and shaved a few bucks off an annual tax bill. What else? I continued to live in it and paid my mortgage. Pretty immense consequences - not.
Today, same house market value is north of $500K, maybe north of $600K, I don't really care as I'm not in the market to sell yet. Taxes are still low though working their way higher, god bless Prop 13. I keep telling the Missus we oughta "put some lipstick on this pig and..." move to our second home in Tahoe. Maybe next year.
If it lost half its value overnight, I'd still be able to get my original investment out. Sleepless about this, I'm not. |
