After reading this advisory today, I think I’ll skip the outdoor run and do my foot strengthening workout today instead, which is all done indoors on the treadmill. I did about 4 miles yesterday outside, and my sinuses are paying for it today.
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Here’s an interactive map of Hennepin County and all the foreclosures for this year. In our townhome complex alone, there’s been 11 foreclosures this year.
It’s a real eye-opener to the problem of predatory lending in this area. But it’s also a glaring example of people living beyond their means. I have acquaintances that have purchased real estate over the past 2 years and they bought as much home as they were approved for in the loan approval process, not paying attention to whether or not they could really afford that payment. What happens is that these people get an adjustable rate mortgage (ARM) to make the payments “affordable” – but don’t realize that it will bite them in the ass later on down the road.
Granted, there are people who bought property to “flip” – buy a property for cheap, fix it up and sell it for a profit – where having an ARM made sense. The problem is that the real estate market will be unpredictable and you can’t control when your property will sell and for how much. Also, with the glut of shows like “Flip That House” and “Property Ladder”, people think that “hey, I can do that” and dive right in, not realizing that the flipping bubble has long since burst.
But I digress.
When I bought my house, I bought something that was $40,000 (that’s not a typo) less than what I was approved for, because that was what I could afford.
Now these same friends, who bought as much as they were approved for and/or because they had to have a brand new house are struggling to make ends meet. I was more than content to buy a property that was 20 years old and put a bit of elbow grease into it to make it a home.
Why am I getting into all of this?
Because no matter how stressful money issues can be, we do have things pretty good. We have a roof over our heads – one that we can afford – and we have an awesome life together. Sure there are the debts that everyone has that need to be paid off, but that just takes time, patience and determination. But for the most part, even though I get grumpy in the morning sometimes, things couldn’t be better. I love my life and the person who makes it worth living. :-*
June 25, 2007 at 2:42 pm
I’m right there with you. Hubby and I bought a house that was almost $50,000 less than what we could have been approved for, but right in line with what we knew we could afford considering the hit our salaries took with the relocation. We’re out in the ‘burbs (and loving it actually), but in a great house, all furnished, and a tiny yard to play around in. Sure, we could have taken a hurting and bought a house in a cooler neighborhood, but we would have been those people living well beyond their means. Right now we have a very comfortable happy life without breaking the bank.
Those ARMs scare me, too. I know so many people who bought that way up in DC with the hopes that the value of the property would increase so much before the rate changed that they would have tons of equity and be able to refinance for something better. Then the market tanked. I hope they’ve all been able to keep their heads above water. We did a traditional 30-year fixed rate mortgage and plan to keep it unless interest rates go down dramatically.
Cheers to homeownership!
June 26, 2007 at 2:24 pm
30-year fixed rate here too! Although I was asked if I wanted to do FORTY year fixed. FORTY YEARS!?!? That’s just insane.
I love your house! You need to have Dave take more photos of it for Flickr.
June 29, 2007 at 1:18 pm
“Also, with the glut of shows like “Flip That House” and “Property Ladder”, people think that “hey, I can do that” and dive right in, not realizing that the flipping bubble has long since burst.”
Yeah, and it’s amazing how the same cycle repeats itself over and over. In ’01 I knew people who, even after the bubble had burst, were quitting their jobs and writing business plans because they were convinced that all the venture capital they needed was right around the corner. It was Operation: Footbullet in its purest form — they had removed themselves from a job market that was falling apart, and then scrambling to get back in as fast as they could.
I’m taking lessons learned from that and applying them to the housing market. Right now the market is overvalued and overstocked. Something’s going to give, and it’s value. Unless an giant asteroid strike wipes out the existing stock.