Anyone else experience a gigantic loss in real estate?

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TRC
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Anyone else experience a gigantic loss in real estate?

Post by TRC »

We bought a new construction in 2006, paid 445k. Put about 50k into it, had 2 kids, and realized we don't like the location. Driveways on a hill, it spills into a somewhat busy country road, we're not in a true neighborhood, and the school system is not that good. Things we really didn't think about before kids. Had a realtor give us a market analysis, and he thinks it will sell for 350k (at best). So if we assume 340k less 5% to the realtor, that nets us 323k. 495k-323k = a potential loss of 172k. That's the equivalent of 2 brand new BMW M3s. :oops:

The good news is that we own our house free and clear. The bad news is the target town and neighborhood we want to get into is in the mid 500s. Of course it's in a much better area and school district, so prices have not decreased as much as where I am. We're planning to finance about 200k....hopefully less. If my income keeps on pace with past years, we could probably pay it off in less thn 5 years, possibly less.

So in the spirit of making me feel better, anyone else out there experience a loss like this before? Any words of wisdoms to insure we're doing the right thing for our family? When my portfolio hopefully hits the multiple 7 figures later in life, a gain of 175k could easily be made back In a good year I suppose?

Conflicted about this one.
The Wizard
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Re: Anyone else experience a gigantic loss in real estate?

Post by The Wizard »

Money seems to be a modest issue for you right now, so what the heck, go for it...
Attempted new signature...
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market timer
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Re: Anyone else experience a gigantic loss in real estate?

Post by market timer »

TRC wrote:So in the spirit of making me feel better, anyone else out there experience a loss like this before? Any words of wisdoms to insure we're doing the right thing for our family?
Ignore sunk costs and make the best decision based on your current state. It might help to reframe your loss as just having paid $2400/month (+ property taxes and maintenance) in rent for the past 6 years.
64415
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Re: Anyone else experience a gigantic loss in real estate?

Post by 64415 »

You are not alone. I purchased in 2006 as well. If I had to sell today I would incur a loss of 225K. Do I like it? No. Fortunately, most of my decisions in life have not been as stupid as those pertaining to residential real estate. Like you, I am not underwater on the home. I would do what you think is best for your family, and not linger on the sunk cost. I say move. I am staying in my home because it suits our needs as shelter and is in a convenient location with respect to work.
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fishnskiguy
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Re: Anyone else experience a gigantic loss in real estate?

Post by fishnskiguy »

We have just north of $800K in our house, and I doubt we could get much over $600K if we sold today.

The difference is, this is our seventh house, and we knew exactly what we wanted, and we got it. Our next move will be to an old folks home, and that's gone down a bunch too, so no loss.

We made a ton in housing over the last 25 years, so the current loss is easy come, easy go.

I do feel sorry for younger folks who bought late in the frenzy.

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dad2000
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Re: Anyone else experience a gigantic loss in real estate?

Post by dad2000 »

Sort of. I'm -$140K on my current house which I've been in for 8 years. But I was +$200K on a smaller house in the same town for the previous 6 years.

My first criteria for buying a home was to be in a good school system. I don't have data to back it up, but my thought process was that the property values would hold up better. More importantly, my kids would be in a positive environment.

If you haven't already, take a tour of the new school and go to some community events. If it still feels right, I'd make the move.
dyangu
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Re: Anyone else experience a gigantic loss in real estate?

Post by dyangu »

Op, if it makes you feel better, those houses that cost around $550k now probably lost more than $172k in value (even if their % loss is smaller, their original price was higher than yours).

Real estate is a leveraged investment that could produce huge gains and losses. I don't know why so many Bogleheads refuse to think about this and keep touting that a house is a consumption item. You can't lose (or gain) $172k in a few years on a middle class consumption item. The only consumption aspect of a house purchase is the rent that the owner forfeits by living in it instead of renting it out (i.e. the owner's equivalent rent that's used in calculating the CPI).
epilnk
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Re: Anyone else experience a gigantic loss in real estate?

Post by epilnk »

We bought this house in 2006. It has declined in value about the same amount as yours. Which doesn't bother me one bit. Seriously.

Why not? Because it's our third house. We used the proceeds from the second house (sold at the end of 2005) to put a 50% downpayment on this house. We knew we were most likely at or near the peak of the market, but we hated renting and decided to purchase with our eyes wide open, choosing to rise and fall with the market tides rather than try to capture the gain with market timing. So the crash ate most of the gain from house 2. Easy come, easy go. It's more than a paper loss because we had that cash in the MM account, so if we'd rented another couple of years we'd be that much further ahead. But we are still above water, in a better house, in a good school system. If we were to sell this house the loss would be offset by the lower price of the next one we buy.

The move to the second house (before life displaced us again) was a family quality of life decision. Like you, we had no clue when we bought the first house. I'm not sure the second house was an optimal financial decision, but it made a huge difference to family life so I'm glad we made the move. Anyway, what's done is done - staying put doesn't restore anything you've lost, and the better school system will always command an added premium no matter when you trade up. It sounds like you can afford the move. So move.
Mudpuppy
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Re: Anyone else experience a gigantic loss in real estate?

Post by Mudpuppy »

It could be worse. I bought my first home in 2007 with a 6.5% mortgage. The house purchase was from my pre-Boglehead days when I fell for all the hype about needing to get a home "now while the prices are falling" (bought about 50k down from peak). That and my rental unit was absolutely horrid with smokers living on either side, making it impossible to ever open a window without getting smoked out.

So now I'm stuck with it. I can afford the payment, but there are no pay raises (and actually furloughs) to redirect into paying it down faster. My servicer refuses to play by HARP2 rules, so unless I can find another one, I can't refi to lower the monthly payment and redirect the savings into paying it down faster. Even if I wanted to move, I couldn't without shredding my credit. So it could be very, very worse....
JDCPAEsq
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Re: Anyone else experience a gigantic loss in real estate?

Post by JDCPAEsq »

Those of us who have lived in Florida for a number of years don't consider your decline as being "gigantic". Welcome to the party. :D
John
carolc
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Re: Anyone else experience a gigantic loss in real estate?

Post by carolc »

A home in our neighhood sold recently after being on the market for about 2 years. It started in the low $700's and finally sold at $439,000. (It was priced too high to begin with but someone got a heck of a good deal at $439,000!)

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Bounca
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Re: Anyone else experience a gigantic loss in real estate?

Post by Bounca »

I'm in the thick of buying a house now while ours is on the market. We are eying up houses that sold back in 2006 for 385K and will go now for 260K. South central PA. I feel sorry for people. Maybe I'll feel sorry for myself when the 260K house we buy this year (hopefully, if ours sells) ends up selling for 160K 10 years from now.
bungalow10
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Re: Anyone else experience a gigantic loss in real estate?

Post by bungalow10 »

We did both a big remodel on our primary residence and bought a four-unit rental during the bubble. The frenzy wasn't as bad here, so we probably lost about $50-60k total, but it still hurts. It's over 10% of their total value gone.

However, we are still going forward with our kitchen remodel and making our house ours to live in. Moving costs more than the remodel will, and we like our house and neighborhood a lot.

I'm hoping that the market recovers enough to sell the rental at breakeven in a few years (we may sell, we may keep it), but for now it is making money. Look at it this way, rents have gone up substantially since the bubble burst, so you probably didn't lose as much as you think you did.
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travellight
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Re: Anyone else experience a gigantic loss in real estate?

Post by travellight »

If you believe Zillow, I am down about 500K right now from its peak value about 4 years ago, before I put 350K into upgrades and remodeling. Luckily, I bought in 92 so I am net up about 300-400K but I sure have enjoyed living here.... wouldn't want to be anywhere else.

I am down about 300K on my second home (about 30% of its value) but I bought that one really well so (net) I am still up about 400K.

It's a wild ride..... helps if you are in it for the long haul so the huge ups and downs even out.
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kenyan
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Re: Anyone else experience a gigantic loss in real estate?

Post by kenyan »

market timer wrote:
TRC wrote:So in the spirit of making me feel better, anyone else out there experience a loss like this before? Any words of wisdoms to insure we're doing the right thing for our family?
Ignore sunk costs and make the best decision based on your current state. It might help to reframe your loss as just having paid $2400/month (+ property taxes and maintenance) in rent for the past 6 years.
If you want someone to commiserate with about large losses, this is the man for you! His thread "A different approach to asset allocation" is legendary around here. His journey (not to mention his open and candid disclosure of his financial picture) was truly astounding. Kick back and read if you've got some time on your hands.

http://www.bogleheads.org/forum/viewtopic.php?t=5934
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LBMM
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Re: Anyone else experience a gigantic loss in real estate?

Post by LBMM »

market timer wrote:
TRC wrote:So in the spirit of making me feel better, anyone else out there experience a loss like this before? Any words of wisdoms to insure we're doing the right thing for our family?
Ignore sunk costs and make the best decision based on your current state. It might help to reframe your loss as just having paid $2400/month (+ property taxes and maintenance) in rent for the past 6 years.
I bought in 2005 and I am trying to sell my home. I will likely net close to zero after realtor fees and closing costs because I am having to drop the price so low. It does help to think of it as simply rent. Thanks :happy
kmurp
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Re: Anyone else experience a gigantic loss in real estate?

Post by kmurp »

We (our medical group) bought a condo for our office in a new building next to the hospital in, I think 1991. We paid around 550k. It's currently on the market for 350K with no interest. We DId just get the tax assessment lowered. I didn't read the whole thread but I wonder how many people have a 30% loss after 20 years of ownership.

Our personal home was bought in 1989 for 180k. Zillow says it's worth 305k, but we have put 265k of improvements in (according to my spreadsheet) so we are at a loss there as well after over 20 years.
Last edited by kmurp on Tue Mar 27, 2012 11:55 am, edited 1 time in total.
itypefast
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Re: Anyone else experience a gigantic loss in real estate?

Post by itypefast »

We bought a house in June of 2005 that had a few "flaws" for $500,000. Who cared about "flaws" back then? You could just spend $$ to fix them and get $$$ back when you sold the house.

Well, as I said we bought the house for $500,000 and within a few years put about $100,000 in improvements into it. After being there for 5 years, in 2010 we sold the house for $430,000.

So...

Paid $600,000 for house + improvements
Received about $400,000 from sale ($430,000 minus 6% Realtor minus 1% transfer tax)

So we lost about $200,000 in capital on that house. I make myself feel better with the knowledge that the housing bubble paid me about $310,000 in capital between various rental properties, a flip and primary residences so net I'm still ahead.

Plus we love, love, love the house we moved into and according to Zillow the house we sold for $430,000 is now worth $380,000.

As evidenced on this forum, there are a ton of people like me (and far worse off). There will be a generation of people that have been stung by real estate. I would be afraid if I were a career Realtor.
itypefast
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Re: Anyone else experience a gigantic loss in real estate?

Post by itypefast »

kmurp wrote:We (our medical group) bought a condo for our office in a new building next to the hospital in, I think 1991. We paid around 550k. It's currently on the market for 350K with no interest. We DId just get the tax assessment lowered. I didn't read the whole thread but I wonder how many people have a 30% loss after 20 years of ownership.
Well, you get to write that 30% off as a business loss. The 33% I lost in 5 years cannot be written off because it was a primary residence.
kmurp
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Re: Anyone else experience a gigantic loss in real estate?

Post by kmurp »

itypefast wrote:
kmurp wrote:We (our medical group) bought a condo for our office in a new building next to the hospital in, I think 1991. We paid around 550k. It's currently on the market for 350K with no interest. We DId just get the tax assessment lowered. I didn't read the whole thread but I wonder how many people have a 30% loss after 20 years of ownership.
Well, you get to write that 30% off as a business loss. The 33% I lost in 5 years cannot be written off because it was a primary residence.
I don't know if we can write it off. We have depreciated it over the years. We will discuss with our accountant if we could ever sell it. I do not think that there is any market in my town for medical office space.
porcupine
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Re: Anyone else experience a gigantic loss in real estate?

Post by porcupine »

JDCPAEsq wrote:Those of us who have lived in Florida for a number of years don't consider your decline as being "gigantic". Welcome to the party. :D
John
+1.

A loss of less than 50%? You should not even be complaining! :wink: Heck, we are even paying interest on top of our losses ...

- Porcupine
breakintheweb
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Re: Anyone else experience a gigantic loss in real estate?

Post by breakintheweb »

One way to look at is that you lost 200k. A differnet way to look at it is you rented the house for 5 years @ 3k a month which really isn't bade for a 600k house. I'm guessing your taxes were lower do to the interest payed on the loan, so you also have that. :D

itypefast wrote:We bought a house in June of 2005 that had a few "flaws" for $500,000. Who cared about "flaws" back then? You could just spend $$ to fix them and get $$$ back when you sold the house.

Well, as I said we bought the house for $500,000 and within a few years put about $100,000 in improvements into it. After being there for 5 years, in 2010 we sold the house for $430,000.

So...

Paid $600,000 for house + improvements
Received about $400,000 from sale ($430,000 minus 6% Realtor minus 1% transfer tax)

So we lost about $200,000 in capital on that house. I make myself feel better with the knowledge that the housing bubble paid me about $310,000 in capital between various rental properties, a flip and primary residences so net I'm still ahead.

Plus we love, love, love the house we moved into and according to Zillow the house we sold for $430,000 is now worth $380,000.

As evidenced on this forum, there are a ton of people like me (and far worse off). There will be a generation of people that have been stung by real estate. I would be afraid if I were a career Realtor.
heyyou
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Re: Anyone else experience a gigantic loss in real estate?

Post by heyyou »

In the RE bust in the early 1980s, I lost savings equal to 2X my annual income at that time. That same dollar amount invested in the S&P500 since then, would now be worth slightly more than my current portfolio.

Carlos Santayana has been attributed as saying that you are doomed to repeat the history that you have not studied. For the last decade, I have had no direct exposure to leveraged real estate so no direct loss during that period.

I'm quite happy these days, but I could be just as happy with twice as much money.
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White Coat Investor
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Re: Anyone else experience a gigantic loss in real estate?

Post by White Coat Investor »

Saw an article on CNN today that the national housing market is down 34% from its peak in July 2006. I bought my last house (now a rental property) in August 2006. I don't think it ever declined 34%, but I had an awfully hard time selling it at a 10% loss.

I'm glad I didn't lose much dollar-wise. I was quite aware we were in a bubble in Summer 2006, so we not only made sure we got a bargain, but also purposely bought a very cheap townhome, so in the event of a huge crash at least we wouldn't lose much. It ended up being pretty equivalent to renting for the 4 years we were in it. We'll see if it turns out to be a good investment. The rent pays everything (PITI) except maintenance. So if appreciation can equal maintenance, I think we'll do okay, especially after we can start raising rent.

I bought my current house in 2010 for about 6% less than the last people who bought it in 2005. It peaked about 20% above what they paid for it.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Lumpr
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Re: Anyone else experience a gigantic loss in real estate?

Post by Lumpr »

TRC wrote:We bought a new construction in 2006, paid 445k. Put about 50k into it, had 2 kids, and realized we don't like the location. Driveways on a hill, it spills into a somewhat busy country road, we're not in a true neighborhood, and the school system is not that good. Things we really didn't think about before kids. Had a realtor give us a market analysis, and he thinks it will sell for 350k (at best). So if we assume 340k less 5% to the realtor, that nets us 323k. 495k-323k = a potential loss of 172k. That's the equivalent of 2 brand new BMW M3s. :oops:

The good news is that we own our house free and clear. The bad news is the target town and neighborhood we want to get into is in the mid 500s. Of course it's in a much better area and school district, so prices have not decreased as much as where I am. We're planning to finance about 200k....hopefully less. If my income keeps on pace with past years, we could probably pay it off in less thn 5 years, possibly less.

So in the spirit of making me feel better, anyone else out there experience a loss like this before? Any words of wisdoms to insure we're doing the right thing for our family? When my portfolio hopefully hits the multiple 7 figures later in life, a gain of 175k could easily be made back In a good year I suppose?

Conflicted about this one.
Assuming the decrease in the price of your house is the result of the overall market (rather than it being a real bad property), houses in other areas probably experienced a similar decline. Of course declines don't affect the prices of all properties in a linear fashion. You could could look up sale prices in your target area circa 2006 and see how much they have declined. This would give you more insight than considering the experiences of folks who are in different markets than yours.
stoptothink
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Re: Anyone else experience a gigantic loss in real estate?

Post by stoptothink »

From a different perspective, I got into residential real estate development with a few friends during the boom. By 24 I was sitting on ~$600k in cash and working on a 9,000 acre planned community, which included a Johnny Miller designed golf course, that we were expecting to gross us 8 figures in profit...within about 18 months I was essentially broke. :oops: Stung just a little to lose your life savings, but at least I was using some of the proceeds to fund graduate school. At the time I thought it was the end of the world as I watched my partners lose homes, cars, boats, and even their marriages; I am thankful all I had to lose was the contents of my bank account and I was young enough where it wouldn't have severe long-term consequences. Easy come, easy go. Should have just bought a house(or two), at least I'd still have a tangible asset to remember the experience.
MathWizard
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Re: Anyone else experience a gigantic loss in real estate?

Post by MathWizard »

TRC wrote:We bought a new construction in 2006, paid 445k. Put about 50k into it, had 2 kids, and realized we don't like the location. Driveways on a hill, it spills into a somewhat busy country road, we're not in a true neighborhood, and the school system is not that good. Things we really didn't think about before kids. Had a realtor give us a market analysis, and he thinks it will sell for 350k (at best). So if we assume 340k less 5% to the realtor, that nets us 323k. 495k-323k = a potential loss of 172k. That's the equivalent of 2 brand new BMW M3s. :oops:

The good news is that we own our house free and clear. The bad news is the target town and neighborhood we want to get into is in the mid 500s. Of course it's in a much better area and school district, so prices have not decreased as much as where I am. We're planning to finance about 200k....hopefully less. If my income keeps on pace with past years, we could probably pay it off in less thn 5 years, possibly less.

So in the spirit of making me feel better, anyone else out there experience a loss like this before? Any words of wisdoms to insure we're doing the right thing for our family? When my portfolio hopefully hits the multiple 7 figures later in life, a gain of 175k could easily be made back In a good year I suppose?

Conflicted about this one.
No commiseration, but some advice on avoiding such a loss in the future
If that does not matter to you, then ignore the following.

1) Location and potential future sale:

The real estate mantra is
Location, Location, Location.

Make sure that this new house is in a desirable location for those that can buy it.
Good schools, good neighborhood, quiet street.
Your children will grow up and you'll likely want to move and then you hope that the
location attracts another family with young children. Make sure that you don't pay so much
that a family with young children cannot buy it. (I bought when I had young children, and can't
imagine paying 1/2 a million for a house. You will have a very small pool of potential buyers
at that price.)

2) Consider the future when you buy, and make the purchase fit your view of the future:
You don't have a loss until you sell, but if you need to move for your family's sake, consider
the house a sunk cost. If you were planning on a family in the near future, you made an expensive
mistake buying in a place that you now consider unsuitable a mere 6 years later. Fortunately for you,
you could afford it. Consider this expensive education, and don't repeat the mistake. Unless 1/2 million
is chicken feed for you, think long and hard about what you need for your family's future and tune out
the real estate agent. Such a purchase should be well considered. Talk with your spouse about your
plans for the house and for the future.

3) Don't buy a new house unless it fits you. If you plan to change a house, buy an old one and remodel.
You bought a brand new house (for nearly $450K) and then sunk $50K into it. This is amazing to me.
Don't do this. If you want to be near a school, where your kids can walk to school, you will almost
certainly have to be in an older neighborhood. So you will need to buy an older house. Buy a cheaper house
and upgrade it to what you want, but try to keep total cost under the median price in the neighborhood,
certainly under the most expensive unless you want another loss.
What was a brand new house missing that you needed to spend $50K on it? I can only think of one thing
that I might do on a new house: If I lived in southern California and had tiered prices for electricity
(say 30cents/KWh on third tier) I might have taken advantage of fed and state tax credits to purchase
solar heat, solar panels to at least avoid the top of the tiered pricing, but that still should be well under $50K.
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Clearly_Irrational
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Re: Anyone else experience a gigantic loss in real estate?

Post by Clearly_Irrational »

Overall my real estate portfolio is worth more than the sum of the purchase prices. Of course it's significantly down from the peak and my newest property is actually negative despite the fact that I bought way after the peak. I wasn't trying to time the market, but originally I didn't realize the sheer magnitude of the bubble. I bought at a 25% discount and break even cash flow on 0% down for the newest one, sadly it's fallen another 22% since then. I've been able to raise the rent so I'm actually cash flow positive on that one now. My holding period is "until death" so I'm not too stressed about it. As long as the Federal Reserve is running the monetary system and the US continues to have positive population growth, nominal price recovery is a mere matter of time. I'm planning to buy another property in about two more years.
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Re: Anyone else experience a gigantic loss in real estate?

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Valuethinker
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Re: Anyone else experience a gigantic loss in real estate?

Post by Valuethinker »

TRC wrote:We bought a new construction in 2006, paid 445k. Put about 50k into it, had 2 kids, and realized we don't like the location. Driveways on a hill, it spills into a somewhat busy country road, we're not in a true neighborhood, and the school system is not that good. Things we really didn't think about before kids. Had a realtor give us a market analysis, and he thinks it will sell for 350k (at best). So if we assume 340k less 5% to the realtor, that nets us 323k. 495k-323k = a potential loss of 172k. That's the equivalent of 2 brand new BMW M3s. :oops:

The good news is that we own our house free and clear. The bad news is the target town and neighborhood we want to get into is in the mid 500s. Of course it's in a much better area and school district, so prices have not decreased as much as where I am. We're planning to finance about 200k....hopefully less. If my income keeps on pace with past years, we could probably pay it off in less thn 5 years, possibly less.

So in the spirit of making me feel better, anyone else out there experience a loss like this before? Any words of wisdoms to insure we're doing the right thing for our family? When my portfolio hopefully hits the multiple 7 figures later in life, a gain of 175k could easily be made back In a good year I suppose?

Conflicted about this one.
You are doing the right thing.

Sunk cost does not matter. Only opportunity cost, the alternative uses of the money NOW.

I lost the equivalent of about USD1m in the dot com boom for failing to sell my employer's shares. Arguably I never owned that money.

London housing remains ridiculous (up about 4-5x since the early 90s) but that, too, may blow up some day. Having traded up, I will take a bigger hit.

Ya gotta live somewhere, I tell myself ;-). ;-).
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TRC
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Re: Anyone else experience a gigantic loss in real estate?

Post by TRC »

Thank you all for the insightful feedback and suggestions!

My wife and I feel comfortable we're making the right choice. At the end of the day, we want to do what's best for our kids. They are only young once and I want them to enjoy the same sense of freedom & safety I had as a kid living in a great neighborhood, riding bikes, playing with friends, etc. It stinks to sell for a loss and I wish we had thought of these factors before buying our current house, but lesson learned - Location, Location, Location. We're fortunate that we're not underwater with our mortgage and that we have the financial capacity to make this work. Now the challenge will be to sell our current house in a timely manner so that we can hopefully be settled in our new place prior to school starting in the fall.
itypefast
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Re: Anyone else experience a gigantic loss in real estate?

Post by itypefast »

breakintheweb wrote:One way to look at is that you lost 200k. A differnet way to look at it is you rented the house for 5 years @ 3k a month which really isn't bade for a 600k house. I'm guessing your taxes were lower do to the interest payed on the loan, so you also have that. :D
Only problem is that doesn't make much sense.

I paid $2,000 per month in mortgage payments in addition to the $200,000 that I lost.
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Re: Anyone else experience a gigantic loss in real estate?

Post by porcupine »

itypefast wrote:
breakintheweb wrote:One way to look at is that you lost 200k. A differnet way to look at it is you rented the house for 5 years @ 3k a month which really isn't bade for a 600k house. I'm guessing your taxes were lower do to the interest payed on the loan, so you also have that. :D
Only problem is that doesn't make much sense.

I paid $2,000 per month in mortgage payments in addition to the $200,000 that I lost.
Well then, you would need to add the principal you paid down as part of your monthly mortgage payments. In other words, instead of using $500k in your cost basis calculation, you need to use your mortgage balance at the time of sale and also account for the down payment.
itypefast wrote:Well, as I said we bought the house for $500,000 and within a few years put about $100,000 in improvements into it. After being there for 5 years, in 2010 we sold the house for $430,000.

So...

Paid $600,000 for house + improvements
Received about $400,000 from sale ($430,000 minus 6% Realtor minus 1% transfer tax)
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GregLee
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Re: Anyone else experience a gigantic loss in real estate?

Post by GregLee »

I lost $240k. I bought in 1994 for $340k, the tax assessor in 2006 said it was worth $840k, but said in 2009 it was only worth $600k.
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Midwest_Investor
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Re: Anyone else experience a gigantic loss in real estate?

Post by Midwest_Investor »

GregLee wrote:I lost $240k. I bought in 1994 for $340k, the tax assessor in 2006 said it was worth $840k, but said in 2009 it was only worth $600k.
Diffucult to see how that is a loss. The way I see it you are now up ($600K - $340K) = $260K, and how you got there matters not.

But Maybe you phrased your post the way you did on purpose. 8-)
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Re: Anyone else experience a gigantic loss in real estate?

Post by jh »

.....
Last edited by jh on Fri May 04, 2012 10:08 pm, edited 1 time in total.
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Re: Anyone else experience a gigantic loss in real estate?

Post by travellight »

I am 50 now. I bought my house when I was 30.
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GregLee
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Re: Anyone else experience a gigantic loss in real estate?

Post by GregLee »

jh wrote:I'm really curious how old the posters with these houses are. Are most of you Baby Boomers?
Pre-Baby-Boomer here --- I'm 70. My wife and I rented for 26 years, and both working, managed to save enough for a $250k down payment. Then it took another 10 years to pay down the mortgage, finished 8 years ago. For a couple of very moderate means, it's been a big project.
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czeckers
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Re: Anyone else experience a gigantic loss in real estate?

Post by czeckers »

I'm straddling both sides of the coin right now. We had been looking to build a bigger house for our growing family (no houses in our area with large family features). Just before committing to the build, we stumbled accross a house that had been on the market for a year and a half, but we hadn't noticed it because their asking price was above our search range. They had finally reduced it to the point where it came up on our searches, and we realized it met almost all of our needs so we bought it. It was 5 years old and the owner had built it for over $600K. We bought it as a short sale for $360K.

On the other side of the coin, a year later now, we have our old house listed now at almost 20% below our purchase price and still no offers. We've looked into renting, but we're in a colloge town and the only rental prospects are college students which we're not too thrilled about renting to.

So, on one hand we're taking a loss on the old home, but on the other hand we got a great deal on the newer one. We also were able to get very good 15-year mortgages on both houses so we're not paying too much in interest. We live in an area with high property taxes, and that's what's hurting the most.

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Re: Anyone else experience a gigantic loss in real estate?

Post by TRC »

jh wrote:A lot of rich posters on this thread. I'd probably need a 200 year mortgage if I wanted to buy a $500k house... :shock:

I'm really curious how old the posters with these houses are. Are most of you Baby Boomers?

I've read some articles that Generation Y is too poor to buy into the housing market. Do some searches on google if you are curious.

I don't think Generation X has any money either and besides they are way too small to buy up all the Baby Boomer houses.

There may be a lot more losses to come in the housing market if Baby Boomers have nobody to sell their houses to.
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Re: Anyone else experience a gigantic loss in real estate?

Post by surfer1 »

Had our house for sale for about 1 year at a 20% loss, and still no luck. Took it off the market. Refi'd to 3.3%. Reduced insurance premium. Contested taxes. Those are some welcome consolations. It does no good looking for someone to blame - the prior owners, the baby boomers, the banks, the government, the list goes on. I'm considering renting the house out if we find something we like.
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Re: Anyone else experience a gigantic loss in real estate?

Post by dad2000 »

(in reply to jh)

Mid 40s, so old Gen X. Have a primary and vacation home, each worth about $750K. Have them about 65% paid off.

Started with my $10K severance from the military 20 years ago. I worked hard, got lucky, invested well. You can too.
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Re: Anyone else experience a gigantic loss in real estate?

Post by 555 »

I bought my house in the 90's for under $100k. Now it's worth twice that. This is typical in many regions of this country. Most people generally simply can't afford many hundreds of thousands of dollars for a house.

People in this thread are talking about huge house prices. To even consider these, you must have `won' somewhere so the `loss' isn't so bad.
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Re: Anyone else experience a gigantic loss in real estate?

Post by detifoss »

I'm probably down about 200k, maybe more, since the purchase in 2006.
I've got about 250k in the condo, so I'm not underwater, but it sure hurts!

That said, we have no reason to move right now, so I can swallow the sunk loss pretty easily. Since my crystal ball is cloudy, and transaction costs are far from negligible, I won;t be catching the back end load on this one anytime soon.

Oh, and I was born in the US, unlike my parents. So I'm up somewhere between 1million and an infinite amount since birth :D

Most of us are lucky and reminding ourselves of it also helps in framing these seemingly large losses.
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Re: Anyone else experience a gigantic loss in real estate?

Post by CaliJim »

From another perspective, both the current house the OP expects to sell, and the new house the OP hopes to buy, have experienced perhaps similar declines in value. So I'm not sure I see the same gigantic loss that the OP thinks he sees. He is really just trading up.
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Re: Anyone else experience a gigantic loss in real estate?

Post by TRC »

CaliJim wrote:From another perspective, both the current house the OP expects to sell, and the new house the OP hopes to buy, have experienced perhaps similar declines in value. So I'm not sure I see the same gigantic loss that the OP thinks he sees. He is really just trading up.
From speaking with my buyers agent, she said these houses were selling mid to low 600s at their peak. They are now priced in the mid 500s. So they have dropped some, but not as much as my town percentage wise. Primarily because of the better school systems, closer to Boston, and closer to major highways.
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Re: Anyone else experience a gigantic loss in real estate?

Post by detifoss »

Actually the loss is real
factoring in transaction costs and the of course the rent vs buy calculation , that money could have been spent and saved, or even grown, elsewhere

of course hindsight is 20/20, but the bottom line for those of us who got buried from 2006-now is that yes, we lost quite a bit of money in the process. Multiple years of after tax wages. But what is done is done. Not acknowledging the loss might be a nice behavioral gimmick, but it is not factual and can lead to other errors, especially later in life.
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Re: Anyone else experience a gigantic loss in real estate?

Post by CaliJim »

detifoss wrote:Actually the loss is real factoring in transaction costs and of course the rent vs buy calculation , that money could have been spent and saved, or even grown, elsewhere. ... for those of us who got buried from 2006-now is that yes, we lost quite a bit of money in the process.
Point granted. I didn't mean to suggest that financial denial is a good strategy.

I too, have owned homes continuously, for quite some time. So I too have had losses, on paper at least.

My main points are that home prices fluctuate somewhat in tandem, and it is the choice to trade up to the less volatile, more desirable, neighborhood, that has turned the paper loss into an actual loss. This just reinforces the old 'three rules' of real estate: location location location.
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Re: Anyone else experience a gigantic loss in real estate?

Post by porcupine »

TRC wrote:
CaliJim wrote:From another perspective, both the current house the OP expects to sell, and the new house the OP hopes to buy, have experienced perhaps similar declines in value. So I'm not sure I see the same gigantic loss that the OP thinks he sees. He is really just trading up.
From speaking with my buyers agent, she said these houses were selling mid to low 600s at their peak. They are now priced in the mid 500s. So they have dropped some, but not as much as my town percentage wise. Primarily because of the better school systems, closer to Boston, and closer to major highways.
TRC:

I think CaliJim's point (which I agree with) is that had you bought the bigger/better/pricier house when you bought the other one, you would probably have lost the same amount (less the improvements you put into your current house, but you should've known that you can never expect to get back 100% of improvements anyway)! Plus, when you factor in the fact that in the last few years, had you been in the pricier house, you would have paid a higher amount of interest, you might want to review your loss estimate :-).

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Re: Anyone else experience a gigantic loss in real estate?

Post by inbox788 »

TRC wrote:We bought a new construction in 2006, paid 445k. Put about 50k into it, had 2 kids, and realized we don't like the location. Driveways on a hill, it spills into a somewhat busy country road, we're not in a true neighborhood, and the school system is not that good. Things we really didn't think about before kids. Had a realtor give us a market analysis, and he thinks it will sell for 350k (at best). So if we assume 340k less 5% to the realtor, that nets us 323k. 495k-323k = a potential loss of 172k. That's the equivalent of 2 brand new BMW M3s. :oops:

The good news is that we own our house free and clear. The bad news is the target town and neighborhood we want to get into is in the mid 500s. Of course it's in a much better area and school district, so prices have not decreased as much as where I am. We're planning to finance about 200k....hopefully less. If my income keeps on pace with past years, we could probably pay it off in less thn 5 years, possibly less.

So in the spirit of making me feel better, anyone else out there experience a loss like this before? Any words of wisdoms to insure we're doing the right thing for our family? When my portfolio hopefully hits the multiple 7 figures later in life, a gain of 175k could easily be made back In a good year I suppose?

Conflicted about this one.
OK, not a real story, but in 2006, we paid $445k and it hasn't changed at all. The target town and neighborhood we want to get into is now in the mid $500s, but in 2006 was less than $400k but we didn't move there then. It would cost us $172k to move there today. Point is you win some you lose some. Sometimes you pick the right house or neighborhood, other times, you don't and someone else does. Loss vs opportunity cost is pretty much the same, even though it might not seem or feel that way. In both cases, it's water under the bridge. And similar to whether you made or lost money on a stock, holding on to a loser isn't any better than selling and switching to a low cost index fund. You made the best decision you could back then with the best information you had and you make the best decision you can today with the best information you have, and hopefully you're lucky.
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