If My House is Underwater, Where is My Ocean View?


 This is a guest post from my friend Miss M at M is for Money.  Be sure to check out her blog!

Hi, I’m one of those underwater homeowners you keep hearing about. No I’m not here to ask for a handout, a bailout or any other way out. I don’t have any grand wisdom on how to fix the situation for me or any of the millions of homeowners just like me. Like a lot of my peers I can afford the payments, but the four walls and a roof are an anchor around my neck, dragging me under. It’s a cautionary tale of bubbles and busts, an American dream gone wrong.

The story starts back in 2004 when Mr. M moved into my studio apartment in West Hollywood. It was a great area to be in as a young single, but the party life and cramped quarters didn’t fit with our current lifestyle. We needed more space and Mr. M wanted a place he could do artwork or messy projects. Rents in Los Angeles aren’t cheap, it’s not quite New York City or San Francisco, but still significantly higher than the US average. For comparison, a 2 bedroom apartment at that time was around $1600 a month. Houses or duplexes with a yard for Mr. M’s projects started at $2000 and up. Even in bubblicious LA buying a modest house would mean a similar payment. It was at that moment I made the mother of all mistakes, I asked my mother for advice.

“You should buy a house, it’s the best investment you’ll ever make. We’ve made money on every house we’ve owned.” Yeah she sounded like a Realtard™ commercial. The hunt was on, I set a price ceiling of $350k, a stretch for us at the time. Finding a house at that price in the city would be tough, but I had no desire to commute 60 miles each way to the suburbs. The housing market was red hot at the time, places in our price range would get multiple offers sending the price above what we could afford. After two months of searching my agent sent me an email, she had come across a new listing that fit the bill, a cute cottage listed at $340k. Even better it was listed in the wrong MLS so it wouldn’t get much attention, we toured it the next day and made an offer that afternoon. It was the first place we’d seen that wasn’t a falling down dump, my offer of $345k was accepted the following afternoon. I won’t go into the headaches to follow, the delayed closing, the unscrupulous mortgage broker or the 2 year legal battle over shoddy construction done during escrow. By May of 2005 I was a homeowner.

In 2005 the experts were already talking about the end of the bubble, that appreciation would slow and prices would start to fall. This was what I expected, instead prices continued to climb for another two years. The highest price paid for a 2 bedroom house in my neighborhood – $490,000. As the saying goes, the higher you climb, the harder you fall. According to the latest reports, housing prices in Los Angeles are back down to mid-2003 levels. The house across the street is a similar size and has been on the market for over 8 months, the initial asking price of $370k has been reduced to $205k! I figure I am anywhere from $25,000 to $100,000 underwater, houses in my neighborhood are all unique so an exact comparison is difficult.

I comfort myself by recognizing that I am in better shape than a lot of my neighbors, like the guy who paid $490k. There is not much I can do at this point, I believe in paying my obligations so jingle mail is not an option. I am not late or behind or in over my head, so the rescues and bailouts from Washington won’t come to my aid. So for now I hold on, watch and wait for the bottom.

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2 thoughts on “If My House is Underwater, Where is My Ocean View?

  1. Tiffany says:

    Maybe refinancing would help with the underwater battle. Sorry to hear about the situation, though, but in an odd way it’s comforting to know you’re not alone.


  2. Lane says:

    Since refinancing is to costly and most consumers are underwater, I found the best results In having your loan modified or restructured with your lender, I’ll created a great self help ebook that will walk you through and give you plenty of resources as well.


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