Book Trailer The Noble Train

Sunday, October 9, 2011

The I Can't Move Generation

Everyone has their cross to bear and for the recession generation of homeowners it is this: they can't afford to move. It used to be you moved to improve your situation. In the old paradyme one moved to a bigger home to take advantage of the increase in equity from the market. Trading up. This was a no brainer. You found out your house had appreciated by a hundred grand and went house shopping. You  found your next dream home then sold your current home and took on a bigger payment but it all came out in the wash because you would get a bigger chunk of equity as the market moved again. Then it all came crashing down.

In the smoking ruins of the bust the housing market is on it's head. Take the homeowner today who wants to sell. He can't because his house is now in a negative equity situation. He owes more than it is worth. There is nothing to plunk down on the next house. But let's say the house is not underwater and he wants to sell. There is still no guarantee it will sell and worse there is no guarantee there is another house out there. This is the kamikaze element to moving now. You might find yourself out in the street because you cant qualify for the next house.

So nobody moves now. People move for a variety of reasons. The big one now is downsizing. No one wants the big house anymore. Most people want to cut costs, but here is the irony of the housing bust: you can't afford to move to a smaller home. The smaller home might cost you more because you will lose all the evaporated equity in your current house. Much like a stock you don't lose until you sell. There is a chance it might come back right? Right.

But lets say you are going full speed ahead. You literally have to proceed like a blind man. You don't even look at the new house. You can only concentrate on selling yours and make peace that you may not get a penny out of it. Then you look for a new home and you have to make peace with the fact you could well end up renting. Because qualifying with no down payment is just about impossible now. So nobody moves.

Who is moving then? The people who get foreclosed. The strategic defaulters who quit paying. The wealthy who walk from their home and buy the next one with cash. The rest of us sit and wait for the next bubble.
Rocket Man...keeping your house shouldn't be this hard

Books by William Hazelgrove