The Mortgage Crisis

Make no mistake folks, there is indeed a crisis of sorts, but to what extent? You read articles of "families losing their homes" and it's usually in a far away place. Surely it's always a friend of friend and no one you know could actually be impacted, right? Loudoun County, one of the richest in the country, is certainly immune to such things... or is it? Lets take a minute to examine some housing costs particularly close to home. Note that I'm using factors because I don't want this to be about how baller we are or aren't. If you're curious and resourceful, you can convert these to dollar amounts.

• July 2002 - Purchased our first - 1.00
• April 2006 - Sold our first - 1.77
• April 2006 - Purchased our second - 2.53
• February 2008 - Selling of house next door to our first - 1.30
• April 2008 - Foreclosure selling of house in our old 'hood - 1.35
  
• April 2008 - Foreclosure listing of house in our current 'hood - 2.22

Let's talk about what I care about most, myself. Some may look at those factors and say we overpaid for our current house. While it's true our house has depreciated since we bought it, that wasn't "real" money. Since we were homeowners who saw a surge in the value of our previous house, we would have lost out on the value somewhere. Either the value of our first house came back to earth and we didn't realize any gain or we cashed out and used that money as a down payment for our second house... which subsequently lost value. When you look at the depreciation in value, the first house actually lost more in raw dollar value which results in a much larger percent (12.5% vs 26.3%) of devaluation. Big deal, right? All that really matters is we're not upside-down on our mortgage and have more than 10% in equity should we choose to refinance or sell down the line.

As you can see, not only are housing prices dropping (duh) but foreclosures are happening all around us. While a bit disconcerting, do I really think something should be done about it? No. The people that bought our first house not only paid a lot more than it's worth now but they mortgaged pretty damn near 100%, I believe. Do I think the federal government should bail them out? No. At some point people need to be responsible for their own decisions and it shouldn't be the feds job to protect people from themselves. If you made a poor financial decision because you got caught up in the ridiculously low mortgage rates, you should suffer the consequences. The market needed a correction and while foreclosures are seen as the Big Bad Wolf of the American economy, maybe the Little Red Riding Hoods out there shoulda paid a bit closer attention before hoping into bed.