The Up Side of Upside Down

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by Matt Elerding for The Columbian

It is Saturday morning. The sun is shining.
I am sitting at my desk in a long-sleeve
fl annel shirt and cool pajama bottoms
with a pattern so effeminate and obnoxious
it would make Richard Simmons and
Lady Gaga shake their heads in utter disbelief.
But that’s okay because I am comfortable; I am
comfortable and I am at home. As I nestle into
my home office chair flanked by a hot cup of coffee,
my hope is that you too are sitting there on
a Saturday morning grateful for a day of sunshine
- minus the mind numbing staff meetings
and bottomless email box that awaits you on
Monday. Meetings and emails can wait because
today you are at home. And that’s a good thing.
Oh, and one other thing; this home that I am sitting
in is worth less than what I owe.
Unfortunately for many of us these homes have
recently plummeted in value in the wake of a
real estate bubble that has popped and left us all
covered in the viscous residue of a market that was
just too aggressive to be sustained. For anyone
that has recently had a Realtor or appraiser give
them the biting reality of today’s values, I would
venture a guess that you – like so many others – are
now offi cially upside-down in your home. Even
if you’re not truly upside-down, chances are you
have lost a tremendous amount of your home’s
equity over the past two years.
Those hit particularly hard are the homeowners
who, in the past few years, put very little or no
money down. As the real estate bubble was ballooning
to its zeppelin sized enormity, the residential
mortgage world was becoming increasingly
intoxicated with a myriad of unsustainable programs
– many of which allowed practically anyone
with a heartbeat and a credit score to buy a home.
The most popular type of loan, of course, was the
80/20 loan (aka the Zero Down home loan). In
addition to fi nancing 100% of the purchase price
of the home, many of these buyers were able to
bake their closing costs into the sales price thereby
coming to the closing table with – literally – no
money out of pocket.
With this smorgasbord of loan programs rolled
out by these here-today-gone-tomorrow lenders
with a “don’t ask, don’t tell” approach to loan qualifi
cation, the world of real estate experienced unprecedented
growth that, as is often times the case,
resulted in an unprecedented correction. ‘Correction’,
of course, is the gentle way of saying we are in
for a long-haul to recapture the losses we have endured
due to the short-sighted debauchery of yours
truly and my loan-hawking brethren. And the
time-frame for this equity-pendulum to swing back
to somewhere between ‘tolerable’ and ‘reasonable’
is known only by the Magic 8 Ball toting members
of our society. “Will my home regain its lost value?”
shake-shake-shake “ASK AGAIN LATER”.
Are we surprised, then, when these people simply
walk away from their home when the market
has taken such a dramatic downturn? They have
‘no skin in the game’ and as much as I stand by
the sanctity of a signed contract, I can’t help but
sympathize and understand the justifi cation for
their decision. Borne out of this tragedy is the
term “Jingle Mail” where homeowners simply drop
their house keys in an envelope and mail them to
the mortgage holder.
Take, for example, the excited young homeowners
who bought a newly constructed home for a
seemingly smokin’ price of $339,000 back in the
heyday of 2006 and now, four humbling and telling
years later, that same home has fallen to a current
market value of $225,000. Most of us would agree
that they have an insurmountable task ahead of
them, as well as a time-frame beyond their control.
They have a mountain of debt to climb – $114,000
to be exact – just to get back to even.
As much as we don’t want to admit it, most of
us share in the culpability of what has happened.
During a time of historically low interest rates and
steroid induced real estate appreciation, homeowners
were treating their houses like a 24-hour ATM.
Need a new car? No sweat, a cash-out refi nance
will buy you the biggest SUV on the lot. Got a hot
stock tip but no available cash to work with? Home
Equity Line of Credit to the rescue. And c’mon,
with the Prime rate hovering around the fours,
what could possibly go wrong? Well, something did
go wrong. The party has wound to a close and now
many homeowners are waking up with a splitting
headache and a mortgage balance in desperate
need of a government bailout. Recent reports show
that over 13 million properties – roughly 30% of all
homes with a mortgage – are in a negative equity
position (or nearing a negative equity position) as
of the end of 2009. Shocking but true.
If you do fi nd yourself faced with the harsh reality
of needing to sell your home in this market,
look at it this way; you will ultimately give a little
(and in some cases, a lot) on the sale of your home,
but on the fl ip-side, when it’s your turn to wear the
buyer’s hat, you will be smiling ear to ear as you
get to assume the position of Deal Taker rather
than the dreaded Deal Giver.
If, however, you are in a home that you can afford
and one that you plan on staying in for awhile –
albeit upside down – then, honestly, who cares?
I’m not ashamed to admit that I too am now sitting
on a pair of mortgages that are worth more
than my humble abode could fetch on today’s open
market (of course you wouldn’t know it based on
today’s tax assessments but that’s another story…)
The bottom line is this: A house is a home. A home
is where most memories – the ones that count anyway
- are made. The smell of Christmas doesn’t
have a price tag. There is no appraised value for
the way the morning sun pours in through the
windows of the family room and lights up the interior
of the home like a movie set. There is not an
industry barometer that can explain why I love the
mystery of how every other light bulb going up the
stairs seems to always burn-out while the others
haven’t been changed since the Mesozoic era.
There is a certain unquantifi able element – a
trump card of sorts – that I feel supersedes the
skewed relationship of the debt and our true value.
These houses – these homes – provide countless
moments of the monetarily immeasurable. The
stuff that makes us all collectively sigh, pause and
bristle with goosebumps at the beauty of it all. It is
where we come together for Thanksgiving, birthdays
and all those seemingly simple family dinners
that we later learn are really the ones that matter
the most. It is where laughter is shared, tears are
dried and love is made. It is in these homes where
all that is meaningful takes place; a stage for the
one and only performance you will ever have.
The appraised value of my home and the balance
of my mortgage pale in comparison to intrinsic
value of watching my little Gage bobble his way on
to the bus each weekday morning toting that huge
backpack that I swear weighs more than he does.
The adjustable rate mortgage is merely an interest
rate that can’t begin to calculate the immeasurable
amount of happiness I derive from listening to my
Crabby Abi sitting at the piano practicing her new
song. The County Assessor has no way of attaching
a monetary fi gure to the feeling I get when I see
Heather working in her garden.
These are the elements of the true value that
maybe we sometimes take for granted. My home,
your home – they are stuffed with stories, yes? The
glorious stories, uniquely mine, uniquely yours,
which tell the tale of a worthwhile existence. So
send me my latest tax assessment if you must.
Clutter my email with facts and fi gures and charts,
oh my, on the record months of stagnant inventory.
Tell me I’ve lost the lion’s share of my equity since
pouring the foundation in 2002. Give me your best
shot. Alas, all you will get from me is a poignant
smile and faraway look in my eyes telling you I’m
lost in the reverie of a Sunday morning breakfast
with chocolate chip pancakes shaped like each
family member’s initials.
In the end, our mortgages are merely numbers on
a page that choke our mailboxes each month along
side the Visa bill and the latest bedspread trends in
this month’s Pottery Barn. I will continue to fi nd a
way to make the payment and so will you. Of this,
I am certain.
Now if you’ll excuse me, I have a top secret
meeting in a tree-fort to attend.

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