I think Clark Howard is a little goofy. Maybe I think that because I feel deep condemnation and guilt when I hear him talk about all the things that financially savvy people do. If he’s telling some caller to do one thing, chances are I routinely do the other. Yesterday, I heard a snippet of his radio show, and instead of turning the channel to mask my own shame, I listened. I didn’t want to, but I couldn’t help it. A woman called in to tell Clark about how she lost her job yesterday. Clark extended sympathy, as did I. Then she immediately launched into how she wants to sell her house via short sale because she now has a hardship that the bank will understand (the job loss), and her home is valued at roughly 15% of her outstanding loan. As such, she makes a fine short sale candidate. I was struck by the thought process. Day One: Lose job. Day Two: Figure out how to dump the house. Day Three: Rent somewhere. Why are we doing this?
I understand job loss is a miserable thing. I also understand foreclosure to be the same. But I also understand the key drivers behind foreclosure, and while illness and job loss are the ones that make teary headlines and sniffling production pieces on the evening news, I know the real trouble is being caused by strategic default, or, simply walking away from the burden of responsibility, err, of a mortgage. This sounds cruel. I know it does. And in a way, it is. But it I’ve been around plenty of foreclosure. I’ve seen it happen when it doesn’t need to. I’ve watched capable owners move from their homes because the stress of making repayments on a loan that they all but guaranteed is seriously burdensome. And now, listening to the woman on that goofy radio show it’s more obvious than ever that people are quite literally trying everything they can to get out of their homes.
But where are these people going? Where is this greener pasture? Rentals are the only logical housing options for those who have been foreclosed on, either through unfortunate necessity or by premeditated choice, as they are for those who pursue short sales. Do most of these people know that landlords also demand payment on the first of each month or they’ll be booted from that home as well? Is a landlord any different from a bank? They dictate terms that you accept and if you break those terms, for whatever reason, there are penalties. The worst of which involves an eviction notice and a locksmith. If the banks are mean for kicking out non-paying clients, then are landlords any different? How did it become a situation where those who seek to enforce previously agreed upon terms of a mutually agreeable contract are now the bad guys?
You can see now why my wife thinks I’m a jerk. But back to the Clark Howard lady. That phone call begs another question. Why is everyone in such a hurry to sell their homes and move somewhere else, anywhere else? It’s like a baseball trade that involves a player to be named later. The team you play for doesn’t want you anymore. You’re not a fit. They trade you for another third baseman who will fill your spot on the field and your spot in the lineup. This is logical and understandable by all parties. But what about when the coach calls you into his office and tells you that you’ve been traded, and when you ask who they traded you for he tells you that it’s a player to be named later? That translates into “all we know is that we don’t want you anymore and who we get in return in inconsequential to this decision.” And also, “PS, we hate you.” The woman on the show was treating her house like the player traded in that trade. She has no idea why she needs so desperately to get rid of her house just one day after losing her job, but she knows she wants to dump it.
Here’s a novel idea. Can’t we all just try to stay put for a while? The primary market is the market I’m addressing here, and the housing in question is the not the fun housing where you lie your lake-loving-head at night but the necessary housing where you live and where your children do their homework and walk home to after school. I have no qualms with seeking out short sales as a potential last ditch effort to avoid foreclosure, but why are we running to the short sale and the foreclosure as a means to get to see what’s behind door number two? I can tell you what’s behind door number two, and it looks strangely like an apartment with white walls and 2 1/2″ baseboard and gray berber carpet.
This started out as a foreclosure update, but obviously didn’t turn into that. I’ll leave you for the weekend with this reminder. Foreclosure markets and trends involving primary homes are near polar opposite of those that affect vacation home markets. That statement is only sort-of true. In order for there to be a substantial difference in the condition of those different markets the vacation home market has to be one in which speculation was never rampant. That’s why you see vacation home markets like Las Vegas choked with foreclosures while a more stable market like Lake Geneva sails through this storm with using only an empty Starbucks cup to bail out the bottom of our very stable boat.