Wednesday, February 20, 2008

How I almost got caught in the housing bubble.

I think my area was one of the harder hit areas in this terrible real estate market. Of course during the good times we were loving life. We bought our house as new construction in March 2004 for $184,000. It took them six months to build it and by the time we moved in it was worth $232,000. We were very happy. As we watched our home price, and those around us, continue to soar we couldn’t help but play with the idea of using our new found equity to buy another house.

The plan was to take a home equity loan and use it as a down payment on a second house. We planned to rent it to my husband’s parents who were paying too much for a trailer at the time. It was win/win. They get a nicer place to live and we cash in on the growing equity.

So we started to look around at new construction. Existing homes were out of the question. People were actually going around and knocking on doors and making offers. Homes that weren’t even for sale! We spent several weekends looking through model homes. We even opened a home equity line of credit so we would be ready to go when we found the perfect house.

Then one night we were sitting around talking about our genius idea and I said “You know, I don’t want to be trying to sell this house right when everyone else is too.” And that was that, the end of our brilliant plan. Suddenly it was so clear that this wasn’t going to last forever. I realized that they were selling houses faster than they could build them, that there were more houses than there were people to live in them. In that instant I saw the market for what it really was. I sat back and waited for the let down.

I have to say that it’s way worse then I ever thought it would be. I had no idea at the time that the banks were lending money to people who couldn’t afford to pay it back. I wouldn’t have believed it if you had told me.

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