Mounting up losses in Mount Olive

One of the common themes during the bubble that it was always smart to buy. If you were renting you were just throwing money away while paying off someone else property. The smart ones bought. And since house values seemed to be rising annually, and by double digits, even buying for the short term could generate profit.

The old standard of owning a property for at least 7 years to make a profit had faded. The new standard seemed to be that anyone with any smarts (just smarts, since during the peak you did not even need money) invested in property. Housing prices only go up. They are not making any more land. No job, no assets, no down payment? No problem! There was always a mortgage broker that could find a loan out there for you.

These were the bubble standards. They made real estate seem like the best investment out there. And for a short time it was true. Those that got in during the big build-up and got out before the great fall did great. Just like with the previous dot com bubble. But the rest of us got stuck holding worthless pets.com stocks or the real estate equivalent.

While the money made was great, the losses are even bigger. Between draining life savings and ruining of credit and families, we will be cleaning up the residue from the bubble for a long, long time. Which brings us to todays example of someone who jumped in just as the bubble was falling and lost a heft amount of their own savings. Lets take a look -

Here is the property -


The stainless steel with what looks like granite countertops -


And the family room -



Here is the property info -

Single Family Property Status: Active County: Morris Subdivision: Flanders Crossing Year Built: 1996 4 total bedroom(s) 2.5 total bath(s) 2 total full bath(s) 1 total half bath(s) 9 total rooms Style: Colonial Master bedroom Basement Master bedroom is 19x12,Includes: Full Bath Living room is 15x12 Dining room is 15x12

Family room is 16x13 Kitchen is 18x13 Basement is Full, Unfinished Hardwood floors Fireplace(s) Fireplace features: Family Room Spa/hot tub(s) Parking space(s): 2 2 car garage Parking features: Built-In Garage, Garage Door Opener Heating features: 1 Unit,Gas Water Heater,Gas-Natural Forced air heat Central air conditioning Cooling features: 1 Unit, Ceiling Fan, Humidifier on Furnace Inclusions: Home Warranty

Exterior construction: Vinyl Siding Roofing: Asphalt Shingle Community clubhouse(s) Community swimming pool(s) Community tennis court(s) Pets allowed Approximate lot is 84X166 Lot features: Level Lot, Open Lot Approximately 0.32 acre(s) Lot size is less than 1/2 acre Utilities present: Cable TV Available, Garbage Service

And here are the financials -

• The property was purchased in May 2006 for $550,000.

• The first mortgage on the same day of purchase was for $440,000 with World Savings Bank.

• The property is currently for sale with a realtor for $539,900.
  

Short list of financials today. The owner put an impressive 20%, which totalled a hefty $110,000. Huge investment during the bubble. However, one must note that the owner has listed $10,100 less than the purchase price of 2 plus years ago. Plus since they are selling with a realtor, knock of another 6% of the sale price. That all figured in, if the property sells for full asking price (which it won't) the owner has only lost $42,494 for 2-1/2 years of ownership.

The $42,494 loss equates to losing just over $1400 per month. Add in insurance, taxes, and utilities plus other closing expenses and this owner would have done better just renting. Plus his money and credit would not be tied up with this property albatross.

We wonder if there will be a backlash against ownership society ideology from the next generation? If not, there should be.