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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Wyätt Gwyön who wrote (28195)3/16/2005 10:17:11 AM
From: GraceZRead Replies (1) of 306849
 
Those average declines and advances are deceptive because it can hide a lot of individual situations which are nowhere near the average. It's like that old joke about the guy with his head in the oven and feet in the freezer, on average he's doing OK.

Back when I held a house underwater, the woman next door to me sold her house 25% below what she paid for it five years after she bought it but she held it empty paying down the mortgage for two years trying to sell it (about 28k worth of payments). She had another house somewhere else she was paying a mortgage on so that money she paid on the mortgage was money sent down a well. So take her real loss on the price of 23k and add the loss on the mortgage payments to nowhere for a loss of 51k and you have her losing 51k on a 89k house, or 57% loss in total before you factor in transaction costs.

My neighbor could have rented and recouped some of the losses and if she was lucky the renters wouldn't reduce the value of her house even more. I can tell you from experience that some renters can easily wipe out any appreciation dreams you might have in a single year of renting. Or she could have done what we did, just stay put a few years longer than we wanted to. I didn't have much choice since I had two idiots on either side of me who decided to buy other houses and move leaving their houses empty for over two years. It is impossible to sell a house bracketed by vacant houses except at very depressed prices. We wound up breaking even holding our house for ten years. Our total cost was just slightly more than what we would have paid to rent the same house, but the mental anguish of holding a house underwater is something you can't really put a price on. I never want to go through that again.

Edit: The punchline is that this all occured during a period which showed small annual average declines in prices in the selling area that my house would have been measured in, the Greater Baltimore area. The serious declines in my area were offset by significant increases elsewhere.
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