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My 10-Year Odyssey Through America’s Housing Crisis (wsj.com)
75 points by dankohn1 4 days ago | hide | past | web | favorite | 87 comments





I bought my first very similar house in 2005 and experienced this exact thing. Fresh out of college, moved to South for a promising job, and bought something small I could easily afford. I even wrote about the potential of a housing crash in Oct 2005 ( http://chir.ag/200510301225 ). I lived there through the housing bubble, saw my 145k house go up to 200k and then down to 75k, rented it out after I got married and moved away, and kept losing thousands each year for 5-6 years.

Last week someone offered to buy it for just a bit over my mortgage pay off balance. I will lose a few thousand but at least I will be out of the landlording business. I have my fingers crossed that the inspection goes well but I'm not holding my breath.

> From the original purchase in 2005 to last year’s sale, I lost $25,500. My losses as a landlord? At least $35,000. Whatever the sum, it no longer mattered. I was free.

It's scary how similar even his figures are to mine. I bought a much more modest house than I could have bought in a prime location, I fought hard to get a great deal on my mortgage, I paid bills on time and kept up with maintenance, and I've kept up with the market trends so as not to miss my chance to refinance/sell.

Time and again I asked myself what I did wrong to lose 60k+ of my hard earned money over a decade. But after an investor friend of mine discussed his plans to buy numerous distressed properties to fix and rent them, I realized what had happened. The Great Recession had turned affordable residential real-estate into a zero sum game. I, along with millions of others had to lose 10k each per year to make it worth it for him to be a residential real-estate investor. My piggy bank investment was competing in the same arena has his tooth-and-nails livelihood.

The big lesson is that market manipulation can convert a non-zero sum activity into a zero-sum activity. It used to be that your small family home was a safe, gradually appreciating asset. Most everyone won, few lost.

> In 1944, John von Neumann and Oskar Morgenstern proved that any non-zero-sum game for n players is equivalent to a zero-sum game with n + 1 players; the (n + 1)th player representing the global profit or loss. https://en.wikipedia.org/wiki/Zero-sum_game#Extensions

Just need one new player to turn the game around. Enter my friend and a few thousand others like him with resources to buy out every third upside-down house in the neighborhood with cash, upgrade bath and kitchen, and then rent them out long-term with a team of property managers. It's a sellers market but very few homeowners are bidding up sub-200k houses. Instead it's the cash investors low-balling the price until owners such as myself and the author just break down and say 'Screw it! At least the 60k loss will save me some taxes next year.'


I don't think the reality here is nearly as sinister as you make it out to be. If an investor is making an appealing return at the price you're selling it to him at then either you're making a poor financial decision by selling or he's playing the game better. I think it's the latter in this case, and I'll explain why.

As background: My father was a handyman turned landlord. I've worked on rental houses since 1st grade. A large number of landlords have a similar background. It's not a coincidence. They make money off properties in the price range you describe in a very particular way - they do nearly everything themselves. It is an arbitrage on the cost of maintenance. Think about it this way - if an electrician/plumber/contractor is going to charge $100/hour to do work on the house and rental prices have this cost baked into them, then you can effectively earn $100/hour by doing the work yourself. Enough people do this that the equilibrium price drops below the cost of having professionals do all of the work. Since that is probably the situation you're in, of course you're going to lose money. You seem to have said you have external management on top of that. That in itself would pretty much wipe out the expected yield. The cashflows from <$200,000 houses are WAY too low to have someone else managing it for you.

So your game theoretic analysis is somewhat correct, but it's more of a feature than a bug. There is an army of people willing to do unglamorous work with their nights and weekends, and as a result they are not only able to do well by themselves but also systematically lower the cost of housing.

You also made a dangerous statement about historical returns on real estate. Historically, across a wide span of markets, real estate tracks wage growth. The recent shift since the mass financialization that started in the 80s being a complete aberration. The alternative is that the real cost of living would grow exponentially. Even with the excess credit of the last 15 years that hasn't happened for most of those outside of SF.

If you want to buy a house to live in, I suggest you view it as a consumption good and not an investment. Your money will almost certainly do better in equities.


Totally agree with: > If you want to buy a house to live in, I suggest you view it as a consumption good and not an investment. Your money will almost certainly do better in equities.

I bought a house in 2007 in Los Angeles. It dropped like a rock. Then it came back. It will never be a great investment. But guess what? We lived in it and it is cheaper than renting. That is the true benefit of a mortgage (particularly in CA where they limit how fast they can raise property taxes): you can lock in your housing cost for a long time. That is a great value for a family.


You've been to exposed to a great life experience. How much of your father's work/investment remains today-- did he manage to create a nest in time for retirement and for your estate?

Retail investing, and especially trading, in equities isn't necessarily a better proposition. It's concerning that you recommended this instead. I hope that your family's hard work paid off.

I have been solo-preneuring a project that will help those like your family to realize their dream. It's been a long journey.


OP was giving advice to someone without handyman skills. That person's money would do better in equities.

In 1944, John von Neumann and Oskar Morgenstern proved that any non-zero-sum game for n players is equivalent to a zero-sum game with n + 1 players; the (n + 1)th player representing the global profit or loss. https://en.wikipedia.org/wiki/Zero-sum_game#Extensions

I think you're slightly misinterpreting this although I could certainly be wrong. The idea here is that you can add a n+1th player to a game who captures the excess profit or loss, but that player isn't allowed to influence the game. In this case, the n+1th player would be the net change in the economy.

It's an interesting idea though. The only real source I found discussing this was the original book: http://jmvidal.cse.sc.edu/library/neumann44a.pdf page 528.


> My losses as a landlord? At least $35,000

My dad remarried after my mom died and moved into his wife's house. He rented it to me for a few years at below market rates. A felt a little guilty about that, all and all it was a cut of $25k in four years. Next guy he rented it to stopped paying rent after a year and took another six months to evict. Guy trashed the house. Cost my dad $60k.


I was a good tenant, always paying on time at market rates and got reports at inspection. But the landlords kicked me out and replaced me with their son. About a month later, one of my former neighbors told me the police literally kicked the door down and took him away.

You can lose your head in rentals with bad tenants and an otherwise good house. It's key to screen and filter candidates or else you're not going to make anything at all, especially SFRs.

Guy I know was in a bind and rented a house to a undocumented family from Mexico. No credit, no papers, no nothing. 12 years later they moved out (bought their own place) and the house was spotless. Rented it a pair of married lawyers, gentrification yo. Two years later they up and vacated the place with no warming. They'd let their dogs pee and shit inside and he had to remove the carpets and sub floors.

You probably don't want to be a landlord. I don't.


I think the bigger lesson here is that we need to stop assuming real estate is a guaranteed return on investment. How long have we collectively held this assumption? I have no evidence for this but I assume it was pushed by realtors over time, similar to how they redefined "the American dream" to mean owning a home.

Your situation doesn't require the explanation of a zero-sum game. The simpler explanation is that you purchased a bad investment which yielded a negative return.


I don't see how residential real-estate investors are to blame for your poor decisions. No one is forcing you to accept a low offer.

You really have no idea if the offer is low or not. It's lower than what they paid but might be good for the current market.

Really though, housing overall should be a somewhat negative sum game. That would be evidence of good policy. Both in terms of physical deterioration showing up as depreciation and in terms of particular locations not exploding in value.


What do you mean they really have no idea? There are multiple ways to get a reasonably accurate estimate of residential real estate market value in most places. For example you can pay a few hundred dollars for an independent professional appraisal based on comparable sales and replacement cost.

This is really basic stuff that doesn't require a great deal of financial sophistication.


Reading fail on my part. I missed where they called it a lowball.

More like they paid too much for the real estate because they misunderstood the "real estate always goes up" mantra.

They confused short-term market fluctuations with general long-term trends that have to do with typical inflation and land scarcity.


I have lived in the Bay Area for 6+ years. Could have bought a house, but the prices seemed crazy in 2014 and look a lot more crazier now. And the prices keep on creeping up higher!

All my friends have bought houses. Some of them have bought houses worth 2.4M in Cupertino. Most of them are Indians on H1B visa and not Green Card in sight!

Are Bay Area prices sustainable? Am I being unnecessarily paranoid?


I own and am not sure. Could have bought in San Francisco in 2001 and decided to buy on the peninsula instead. Cupertino still had starter homes < 500,000 at that time but I didn't want to live there, either. For a while there it looked like a mistake to not live in the city then the market turned insane and the peninsula housing market is almost as hot as the city. Part of me wants to take the profit and run but to where?

Midwest? Buy 10-15 rent houses in a college town and retire.

My neighbor owns 15 houses and lives in Europe most the year. I'm working on the same path (may buy their homes in the next year or two, we're in discussions).


Does this plan mean living in the town and doing the property management or is it more self sustaining remote?

You can do it either way. The risk threshold from my perspective is how much you charge in rent, with how large your deposit is, along with how often you inspect your properties.

Also, you have to be prepared to sue, file liens, and use sheriff evictions.

Everything is easier if you're local. If your investment is large enough, flying in to deal with your properties is a reasonable business expense (I wouldn't do it outside setting up a company and having general liability in addition to your normal house insurance).


The same place, but as a renter? That's what I'd do if I were up ~1M on a house.

The Toronto market has recently rolled over and prices are falling. I knew a few people who were able to sell at the peak of the market. I also know one person who tried to sell, the downturn happened and the buyer pulled out.

Some folks were able to walk away with $1M cash and just rented after. The rent to home price ratio is crazy in Toronto and they were able to rent a home for $3000 that would cost $6000 in mortgage payments.


Nearly anywhere.

Unfortunately no. Not all of us are thrilled about a life of remote work. I for one work best side by side with a team of people. That environment is only easily attained in the exact places that have ridiculous real estate markets. I've looked many times at different markets and for me moving doesn't make sense. So near Seattle I stay.

Surely, you're not serious about this?

I work (in an office, not remote, mind you) at a tech company in the Research Triangle area of North Carolina. Most of the people I know also work in tech companies. In fact, outside of state government and the school systems, the major employers around here are all tech companies and research universities. You can easily have an entire career in tech, working in-person, in good jobs doing cool stuff. And the cost of living around here is a tiny fraction of what you'd pay in the SF/NY/LA/Seattle.

If you want to live in [big overpriced city] because you like said big overpriced city, feel free to do so. But HN really needs to get over this ridiculous idea that big, overpriced cities are the only place to have a tech career.


I just moved from Seattle to Raleigh, and I'm still trying to learn the local tech scene. Can you share any info publicly on companies doing cool stuff around here?

You're right. I don't actually know enough about the distribution of tech careers to hold a strong opinion. I'm largely operating off my own experience, which is this. When I look for jobs in less populous, more affordable areas I tend to run into the same thing. There are mostly regional/local companies looking for very specific types of engineers and more generalized engineering opportunities are almost always looking for 10-15 years more experience than I have. As someone who is still a junior engineer of the generalist variety I've been unable to find much. I'll admit, I haven't looked on the east coast though, as that's very far from my family.

I am a Bay Area resident interested in the Raleigh tech scene. Any interest in connecting? Can be reached at 650 338 2164

"That environment is only easily attained in the exact places that have ridiculous real estate markets."

There are places in middle America with open positions for many people that have relatively inexpensive living costs in comparison to places like SV, Seattle, New York, and so on.


I did a cursory search on craigslist and last months hiring post and most of what I could find had very specific prerequisite experience, some had low 3-5 maximum years experience, and the selection of jobs was pretty low barring the West/East Coast, Austin would be in the running but I moved from there. You mentioned New York as too similar, but there are a lot of interesting companies there.

Chicago, Indianapolis, Minneapolis, Nashville, Columbus all fit your criteria and have “cheap” housing. It’s a big country.

As someone who grew up in nowhere Illinois it’s funny when I hear Chicago has “cheap” housing.

I would not recommend moving to Chicago proper until Illinois gets their major fiscal problems worked out. If you absolutely can't avoid it, living in Gary, Indiana, or Kenosha, Wisconsin, will do until then. Take the Metra if you need to get into the city.

Indianapolis has some of the cheapest housing in the US, but it also has very low salaries for software professionals. I have a lot of family there, and I just can't move back. Sure, it's nice to own your entire house for only $150k, but the pay cut means you'll spend longer paying it off than you thought.


==I would not recommend moving to Chicago proper until Illinois gets their major fiscal problems worked out.==

Recommending people move to Gary or Kenosha simply to avoid living in Chicago is pretty silly and a vast over-reaction. Markets have priced in the fiscal issues and Chicago is still cheaper than comparable cities for tech professionals. Even with increased taxes, Chicago will remain cheaper than New York, Seattle, Denver, Los Angeles, San Francisco, Boston and DC.

Pretty much every city/state in the US has a pension crisis and will require tax increases. Would you recommend people avoid these places?:

- Houston - https://www.houstonchronicle.com/news/politics/houston/artic...

- Dallas - https://www.dallasnews.com/news/dallas-city-hall/2017/11/13/...

- All of California - http://www.sacbee.com/opinion/editorials/article199693069.ht...

- Seattle - http://www.foxnews.com/opinion/2017/08/22/what-seattle-incom...


Yes, yes I would. Avoid those places.

Always prefer to live in places that do not have basket case governments that kick the can down the road for the next guy to fix. Previous generations avoided fixing the problems by anticipating that new blood would bring in their money, and they could grow their way out of trouble. Don't be the sucker that comes in to a new situation who is then expected to carry old baggage.

I don't think Illinois is bad enough that anyone should move away if they already live there, but their choices are to move away, become more politically active, or be left holding the bag for prior decades of bad government.

It's like any other relationship. You're going to have an easier time with someone who seems capable of dealing with their own problems, than with the person who pushes responsibility for their problems on to you.

If you simply must live in a particular place, you need to account for bad government as a price premium. If you intend to work in California, you need to increase your salary demands, to account for its insufficient housing stock and property tax laws. It just so happens that many businesses in California can currently meet those demands. A lot of places with bad government cannot, so just don't go there.

And if your local government seems to be turning sour, you need to stand up, make some noise, and let those responsible know that you will not allow your home to become one of those places. If things still go bad, leave. Corruption only works when people go along with it.

And that is why I moved from Chicago to Kenosha in 2002. As it happened, I then moved again to Madison in 2005, but that was moving to something rather than moving from something else.

What kind of city sells its own parking meters? The kind you don't move into.


In the 16 years since you left Chicago, the sky hasn't fallen. The percentage of population with a college degree is the highest of the country's 7 largest cities (http://midwest.chicagofedblogs.org/?p=3048), which implies educated people are disagreeing with you. Also, if your claim is about taxes, you seem to be misinformed as:

- Wisconsin has higher income taxes than Illinois

- Kenosha and Madison have higher property tax rates than Chicago

The parking meters were sold 10 years ago under a different mayor, update your talking points. Meanwhile, Wisconsin is handing out $3 billion to a Chinese manufacturing company (http://money.cnn.com/2017/09/18/news/scott-walker-signs-foxc...). This is the same Wisconsin (and same governor) who cut school funding a few years earlier (http://www.politifact.com/wisconsin/statements/2014/sep/07/g...).

What kind of state cuts school funding and then gives billions to a Chinese company? The kind I don't move to.


My buddy bought his house in the city in 2011. I was going to do the same but a 3400/mo mortgage seemed fucking nuts.

His house has more than doubled in equity though, so not too bad from his perspective. I moved back to the midwest where shit is reasonable, now I just blow that 3400/mo on fun stuff instead of mortgage/rent.


They can always skip the country if prices collapse. No skin the the game.


Bought a house in 2007 in Colorado Springs and had to move out of state in 2012 for work - the crash meant I was underwater on my mortgage, but not by much.

So, I decided to hire a property manager (Lesson 1: Never be a landlord if you're not going to be present to manage the property yourself - PMs take their 10% cut of the rent and do absolutely nothing in return) to rent the place out and sell in a few years after the market had recovered - which didn't happen in Colorado Springs until recently.

Last summer I gave my tenant her 60 day notice, found a listing agent, and my wife flew out to Colorado Springs to help prep the house for sale...

Turns out the tenant had totally trashed the place. In fact, she had been operating a rabbit breeding operation in the house (there were rabbit cages stacked floor-to-ceiling in some places, and a large outdoor hutch had been constructed in the back yard). Carpets ruined, feces smeared on walls, and a general unholy smell throughout the entire house. Hell, large amounts of rabbit bedding and feces had been dumped into the crawlspace.

This is the tenant I had cut a lot of slack to over the years with late payments, etc (Lesson 2: Never cut a tenant any slack - if you do they'll walk all over you).

What should have easily been a $40k profit (had the house sold at market rate) turned into a $5k loss (at least I didn't end up owing any capital gain tax, pfft). I will burn a house to the ground before I become a landlord ever again.

Also, Zillow keeps sending me updates on the property value (which magically keeps going up), despite my attempts to make it stop (I don't want to know, really) :(


That's unfortunate, and something that keeps me only managing my own properties locally. I know it won't scale so much, but I feel like I have too much skin the game for the property to lose value on my own fault.

It sounds like a very bad experience with a management company. Was this your first PM company?


Yes, first and last time being a landlord. When I was growing up, my parents had a similarly bad experience renting a home they couldn't afford to sell after moving out-of-state. Theirs included an unscrupulous (rather than just incompetent/lazy) PM who charged them for unnecessary and expensive repairs, and tenants who paid their deposit and never paid again (the PM talked them into renting to Section 8ers). The situation ultimately ended in foreclosure for my parents (they were depending on rental income to make the mortgage payments).

If I ever find myself upside-down on a mortgage again, I'm going to short-sale, walk away, or find a reputable local arsonist to deal with it.


[flagged]


Ha, that's a bit harsh, no? Nice opinion piece, by the way, checks all the boxes for stoking outrage.

Maybe landlords do serve a purpose? Maybe people who don't want the responsibility of owning a home can benefit from renting? Maybe people who can't or don't want to save for a down payment can benefit from renting? Maybe people who don't plan on settling in a single place any time soon can benefit?

Let's use our critical thinking skills next time before jumping on the crazy train.


Grow up. I've been a renter in the past, and when you're a renter you're expected to perform a minimal amount of basic upkeep (to include small things like not breeding rabbits inside the home) as stipulated in the lease -- don't like it, don't sign it.

And a property owner is not a parasite who does 'nothing.' They're responsible for making repairs when something breaks and performing regular maintenance. A property manager is supposed to handle collecting rents, arranging for repairs (and passing along bills to the owner), and monitoring the property to ensure the lease is being adhered to (which my PM clearly failed to do).

I always turned over the properties I rented back to their owners clean and fit to be rented out (or sold) again (I always got my security deposit back). It's also kind of a basic courtesy when someone trusts you to live in their property. I'd rather be trusted than have to suffer through weekly inspections by the property owner, but that's just me.


I'm not condoning willfully damaging something, I would never do that, however I am amused that the original poster just wanted to live the rentier dream of delegating and watching the dollars flow in. No risk (wrong). No work (wrong).

As for "collecting the rent" for the most part this is checking if it appears in a bank account. If you are exploiting someone who has finance issues then sometimes you have to threaten them if they don't pay.

They should just work on creating wealth instead of trying to exploit a need for housing for their own gain. The negative equity they found themselves in is part of the same cycle of greed.

As a another poster noted, it's a zero sum game and for there to be successful parasites others have to lose.


>> I'm not condoning willfully damaging something

Yes, you are. By using it as a point against the landlord in saying they thought there was no risk in renting out property. The willful destruction of the property is the risk. The work comes in having to deal with the outcome of that risk as well as building up the capital to purchase the property in the first place. The person wasn't just magically gifted a property to rent out to someone who would just destroy it. The story you are trying to refute actually quite handily disproves the point you think you are gloriously making.

But keep going with this drivel, you are quite amusing.


As a renter you pay for services that you have to provide when you're an owner.

When I rented, I shopped around and made sure I found a landlord that wasn't bilking me as a revenue source.

Keep in mind that your analogy can be applied to property owners who think they can just occupy a house for a few years and walk away with a massive profit.


it's sad, how much the author suffered for bad behavior on behalf of the banks.

They got bailed out, the author didn't. He should have foreclosed.

The banks lent money they didn't have. I don't see why the author paid it off. I respect his integrity, but he should have declared bankruptcy.


> The banks lent money they didn't have.

I don't get this. Banks must always do this, they exist because everyone else wants to lend short term or borrow long term. Anyone who acts as the counterparty to that is automatically a bank or bank-like.

I guess what you mean is that when the banks borrowed short term (as they must), they did it using home loans as collateral, and that more of those loans defaulted than was expected.

How does that justify defaulting?


> I guess what you mean is that when the banks borrowed short term (as they must), they did it using home loans as collateral

But that's not really what happened. Banks made a lot of poor quality loans, then packaged them up and sold them on, taking a spread in the process. Some banks (e.g. Bear Stearns and Lehman) kept some of that risk on their books, but others (Goldman) didn't.

This wasn't a case of banks using their mortgage book as collateral, it was banks originating and actively marketing a dangerous product. It's also worth noting that some banks knew that the products they were selling were low-quality and likely to default.

Then the US government stepped in and propped up the instigators of the crisis. People who made poor borrowing decisions had a part to play in the crisis too, but I think it's fair to argue that the pain could have been distributed more evenly.

Under the circumstances, I can see why it might seem fair to walk away from an obligation like the author's mortgage.


Neither Bear, Lehman nor Goldman 'make' loans. They created CDOs,CDSs,MBSs and sold them to other credited investors.

Yeah, fine - that's a simplification. They bought third parties' loan books and securitised them. But it was that flow of money that encouraged the bad lending practices. If you know you can make a crappy loan and sell it on to Goldman for a profit, you'll make the loan.

On a basic level, yes, banks need to lend money. But saying more defaults came in than were expected is a vast understatement. Banks lent so much money, and were so exposed to risk, that any market correction could have, and did, destroy well established financial institutions. I mean, we're talking razor thin protections from financial ruin basically predicated on the need that housing must always go up. It is literally insane levels of over exposure - not just small leverage to help build a small housing community.

How can you expect people to not default in a system endemic with corruption and rife with irresponsibility?


The way to look at defaulting is the way the bank would. As a business decision. The bank wouldn't bother justifying themselves if they walked away from a deal, they would just pay the penalty and move on.

The author pointed out that his mortgage was a recourse loan.

Bankruptcy only lasts 7 years on your credit, and would’ve wiped all of his debt clean (save for government backed student loans). He’s been stuck in limbo for 10. It’s rare for lenders to pursue recourse when the borrower is insolvent.

In general, yes -- the luxury car in the drive was also bought on credit and is underwater and/or is a lease, and you can't repossess poorly chosen tattoos. Thinking you have a moral obligation to a bank is a fools errand, because they'll happily screw you for a penny.

As the article points out, however, the author was gainfully employed elsewhere. So in this case, the threat of recourse was quite real.


You can still declare bankruptcy while gainfully employed. Some states have much stronger protections for borrowers from creditors than others.

I don't understand why we're going around in circles on this, but the author could afford to make the payments. According to him, the net cost was approx 60k over 10 years, split between the price to buy his ex-wife out and the after-rent operating costs. I don't believe bankruptcy courts are going to help with a payment this person could make without particular difficulty, even if it comes with plenty of regret.

We’re going in circles because I’m providing advice from experience, but I don’t think you have the same experience in navigating contract law to shed debt.

So my impressions were formed by spending a lot of time on credit card forums and reading perhaps several hundred bankruptcy stories over the years. Does chapter 11 -- or even 7 -- regularly help with debts where someone has a well paying job and can afford the payments on a house, but no longer wishes to? Because that, specifically, is where the author was.

I don't disagree at all that anyone in debt to a bank should use every avenue open to them, just as the bank will.


Needless to say, if you try to declare bankruptcy while being able to meet all required payments, that will simply result in having a court judgement to pay those debts.

Which is why if you need to move for work but can’t afford your mortgage, you move and then default, showing you couldn’t be gainfully employed and service all your debt and new housing expenses. The court isn’t going to force you to move back into your underwater property and leave your new job.

Well sure, but you'll have 80% of wages confiscated for up to 5 years. And you'll be unable to get another mortgage for longer than that, and paying more when you do.

You’re eligible for a new mortgage as soon as 1-2 years after a Chapter 13 BK discharge, depending on the loan product and GSE. Sometimes it might be a bit longer, but still nowhere near 7-10 years.

Not all jobs. If you have a security clearance, that would be pulled for bankruptcy.

Declaring bankruptcy can actually help save a security clearance in certain cases because it helps resolve the security clearance holder's susceptibility to coercion or bribery.

I don't hold a clearance though, so I can't speak from first hand experience. Always be upfront with your employer and clearance sponsor if you're considering bankruptcy.


What I don’t see anybody talking about what’s going on with car loans. The next time we have a recession it’s going to be a lot worse as people will lose both their houses and their cars. I know a waitress who can barely afford an apartment, with no family support or co-signer, who financed a brand new Jeep. This is not sustainable.

Why don't more people just live in RVs/vans? Taking out a mortgage is a huge risk over 30 years - what happens if you lose your job and cannot find another one at the same pay? Or you get sick and cannot work?

I guess you could sell and take the equity out of the house but you lose so much money and time to the banks.


My god, the author of this story made all the wrong choices. Wouldn’t walk away from the property, liquidated his 401k to obtain sole possession of the dwelling from his ex, wouldn’t commit to missing payments to get a workout commitment from his lender.

Had he walked away from the property, he’d still have his 401k (protected from creditors by federal law; he could’ve lived in the house for years while it went through foreclosure and put his mortgage payments in his 401k) and if the lender absolutely decided to pursue the deficiency judgment (rare), he could’ve settled for pennies on the dollar or declared bankruptcy and still been hundreds of thousands of dollars ahead.

Just sad. My advice to those who read this: never get emotionally invested. It’s just business. Look at the numbers, and throw out any sense of morality of the debt repayment. That is how the system is built; act like a rational actor within it (losses are built into the mortgage interest rate). Your future self will thank you.


>My god, the author of this story made all the wrong choices.

Did he? He kept his job, didn't get drunk or hooked on pain pills, bailed out what sounded like a very uncooperative ex-wife, and all through it kept his house clean and even took care of the neighbor's dog. If anything, I'd say the story comes dangerously close to being a humble brag.

Whatever money difference there was be between him and pretty much any of the others, including the couple who skipped town with pizza on the counter...I'd gladly pay it twice over to have neighbors like this guy.


My first wife tried this uncooperative shit with our home (I bought before we were married). I told her I'd sell it for exactly what we owe if she didn't take my fair offer.

Probably should have just gone ahead and done that but I didn't want to move.


From the assumption of self-interest, yes he made all the wrong choices.

Being a model citizen or nice neighbour or a bank's best friend is another story.


For some of us, it's engrained into our moral code to fulfill our word with people. And this is manipulated so we'll extend it to corporations. It took me years to learn how to handle relationships with large companies and I still feel horrible frequently after a call with a rep for one.

I've spent hours on the phone trying every way I can to resolve some issue and it too often just comes down to being a jerk. But in so many ways they create the rules of the game.


Yep. In German, debt is guilt. In Aramaic, debt is sin. But in English, debt is just debt. If you owe your debt to a physical human being who's legit struggling, I implore you, make every effort. But you owe nothing at all to a company unless the law will force it out of you.

Hell, if he'd sold the property for 'less than it was worth' at any point, it sounds like he'd be better off.

> I prepared to sell our house. To cover sales commissions and other expenses, we’d have to sell it for more than we’d paid for it

yea, that's not how house prices are set.


He'd already moved by the time he desperately wanted to sell.

I know, what a fucking stooge, amiright? He actually wanted to pay his debts. What a loser.

If you treat your mortgage like a blood oath instead of a contract, then yeah, you're a dummy.

The debt was given by a company to him with lots of caveats, one of them is not paying it. They are consequences of course.

Rule of thumb: pay back your grandma, but if the corp lender will screw you if he had a chance, treat him the same. Debt from people really trying to help you out and debt from companies trying to milk you left and right isn't the same.

Should one feel guilty of not paying, if you CC rate goes to 30% for being late a few payments and they do nothing to lower the rate?


You could compile a good list of who to do business with and who to avoid right here.

I'd prefer you do business with me because our contract is mutually beneficial and we both understand the risks we're undertaking.

Not because you think you have some kind of honour debt to me.


On the other hand if you think you could weasel out of an agreement because the contract isn't defined tightly enough then I wouldn't want to do business with you.

Emotive words like 'weasel' don't belong in a business discussion.

If the best course of action for you is to walk away from our deal, then I encourage you to take it. I would hope you understand me doing the same.


Any link to this article without paywall?




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