I saw a news headline this morning online that nearly made me choke on my coffee. “Yes, The U.S. Housing Bust Is Over” it proclaimed, so I clicked through and read on with fascination.
Is it possible that there may be light at the end of my financial tunnel in the foreseeable future?
From the age of 20, I’ve been a homeowner. And from the age of 22, I’ve been a multiple home owner. The cycle repeated itself for several years — I would move, buy a home, move somewhere else, keep the previous home and rent it out. And each time, I would use the equity (value of the home greater than the money I owed on it) of the home I was vacating to purchase a new, more expensive home wherever I was moving. I built up a portfolio of four properties, each rising in value every year, and in the process I developed quite the nest egg for myself.
The last two I purchased were the smallish condo I lived in when I first moved to Charlotte, and then the larger condo in Charlotte that I “upgraded” to almost two years later. These were in the mid-2000s, right at the height of the housing boom, when housing prices (particularly those in the metropolitan area of Charlotte where I lived) continued to rise seemingly by the day. The equity I’d amassed in my first condo after not even two years was enough to put a downpayment on my new home. I was going to become a real estate mogul and retire at forty.
And then all Hell broke loose. The housing market shit the figurative bed, and housing prices plummeted. I found myself holding two condos in Charlotte that were worth considerably less than what I owed, a house in New Mexico that could potentially break even if you ignore the tax implications, and a house in Florida that was literally worth 10-20% what it had been a year or two prior. I was, to be melodramatic for a moment, ruined.
So why has this article nudged my spirits just the tiniest bit higher? In “Housing Passes a Milestone“, author David Wessel notes that housing prices are rising slowly, inventory of unsold existing and new homes is dropping to close to normal levels, and even new-home construction is increasing dramatically compared to last year. Forecasters are largely in agreement that the housing market has reached its bottom, and is inching back up. And that means there may be hope for someone in my situation.
At this point, a “win” for me would be to be able to get out from under most (if not all) of the properties that I have. Being able to sell them for what I owe on them, and walk away even without any profits but without any debt, would be such a tremendous relief. Given that the values aren’t increasing year over year, any time there’s any kind of maintenance issue (roof, air conditioning, refrigerator, etc.) it’s a direct hit to my bank account. I can’t shrug it off and tell myself, “That’s okay, the property value went up by more than that this month!” and consider myself ahead. And since in most cases the rent doesn’t cover the mortgage, the only way I break even is at the end of the year through the tax benefits of a money-losing investment.
You can imagine why it’s an appealing thought, no longer laying awake at night wondering what’s going to need repair or replacement next… To be able to just pay the rent and call the landlord or super when something needs fixing? Bliss. To be the guy on the other end of that call who just found out he’s gotta find a credit card with $1,000 available credit to replace something expensive? Terror.
So yes, if the housing market improves to the point that I can walk away and have no mortgage debt on rentals to worry about, and avoid ruining my never-had-a-missed-payment credit rating with a foreclosure or short sale, I will do so with a triumphant grin on my face.
Knowing me, though, I’ll probably hang on to one or two… because you know, it might still end up being a good investment in the long run, right? (Yes, I’m hopeless.)